The International Monetary Fund (IMF) has called for regulation of capital flow management as the so-called "cryptoisation" risks destabilize emerging markets, Tobias Adrian, the IMF's financial counsellor and head of its monetary and capital markets department, told the Financial Times in an interview.
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Adrian admitted that applying established regulatory tools to manage capital flows "may be more challenging when value is transmitted through new instruments," adding that it is a "big challenge for policymakers in some countries."
"Crypto is being used to take money out of countries that are regarded as unstable," Adrian added.
The senior official at the IMF assured that regulators all over the globe can no longer "just dismiss" the cryptocurrency market as it has become more correlated with equities. Even though global regulations were never quick, regulators should start now to achieve the goal of "maintaining financial stability," said Adrian.
The IMF has been vocal about the need for the crypto regulation for a long time now. As iHodl earlier reported, the IMF called for El Salvador to remove bitcoin's (EXANTE: Bitcoin) legal tender status over large risks associated with the use of the cryptocurrency on financial stability. The organization added that even though digital wallets like Chivo boost financial inclusion, executive directors highlighted the need for strict regulation and oversight.
In January 2021, the IMF also expressed concerns regarding the growing interconnectedness between cryptocurrencies and stocks. The organization warned that a tight correlation between crypto and stocks can destabilize financial markets.
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