The International Monetary Fund (IMF) has quelled concerns over the wellbeing of the mainstream financial system in light of the collapse of crypto markets.
In a report published on Tuesday, the IMF talked about high inflation and the potential of a recession.
The institution was more concerned with covid returning and the war in Ukraine taking a financial and human toll than about any immediate red flags regarding cryptocurrencies.
The report considered the recent collapse of TerraUSD and the Three Arrows Capital hedge fund but deemed neither event to pose a serious threat to the financial order.
The IMF has warned about shocks spilling over from the cryptocurrency market to mainstream finances in the past, but this doesn’t seem to be the institution’s assessment today.
For the time being, such spillovers have been limited. However a report by the European Systemic Risk Board in June, said that there is still a good chance that major disruptors in the cryptocurrency space could have negative consequences on traditional finance and the economy.
The IMF did warn El Salvador not to go ahead with adopting Bitcoin as its legal tender and argued that more regulation was needed in the sector – a slow process that is finally shaping up with the help of global financial leaders.
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