- The IMF has issued a warning about the rapid growth of blockchain and cryptocurrency
- Its rapid growth could lead to vulnerabilities and the carrying out of illegal acts
- The international community will need to create regulations around blockchain
The remarkable growth of blockchain and cryptocurrency in the last few years has certainly been unprecedented and has also become more of a part of people’s daily lives. However, as reported Tuesday by Forbes, the International Monetary Fund (IMF) is cautioning investors about the rapid growth of blockchain and cryptocurrency, saying that it could cause “new vulnerabilities in the international financial system” as the world’s financial systems are trying to adjust to these changes.
Could create vulnerabilities in Financial systems
According to the IMF, blockchain technology could be used to create new vulnerabilities in the world’s financial systems, particularly in the case of cross-border transactions. According to the fund’s latest World Economic Outlook report, out today:
“Cybersecurity breaches and cyber attacks on critical financial infrastructure represent an additional source of risk because they could undermine cross-border payment systems and disrupt the flow of goods and services.”
Despite these risks, traditional financial institutions are conducting research about how to integrate and make use of the various cryptocurrencies as both investment tools and mediums of exchange as acceptance of digital currency grows.
All over the world, governments have, at different paces, made efforts to adjust to the fact that crypto is here to stay.
In the U.K, it is being used for public land registration and landline number management. On the other hand, government leaders in the U.K referred to cryptocurrency as a wild west and expressed caution over its adoption.
However, Christine Lagarde, head of the IMF, stated in February that the adoption of Cryptocurrency is inevitable and that the concern on the part of the IMF is simply because of its potential to be used for fraud and illegal activities.
The need for international regulation for blockchain technology and cryptocurrency is also inevitable according to Lagarde and while countries and states are individually setting their own laws, the international community will, at some point, have to come together to deal with the issue.
“An indiscriminate rollback of post-crisis regulatory reform and oversight—both domestically and internationally—could encourage excessive risk-taking, leading to a further buildup of financial vulnerabilities,” the latest IMF report for October also stated.
While the IMF has acknowledged the risks involved, it also sees the potential in it moving forward.
“Despite its potential benefits, our knowledge of its potential risks and how they might play out is still developing.” Says the IMF’s recent stability report.