Crypto Selloffs Haven't Hit Wider Economy, IMF Admits
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Crypto Selloffs Haven't Hit Wider Economy, IMF Admits

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Similar sentiments have been made by the Bank of England, but economists have stressed that there is still a threat this could happen in future.

Crypto Selloffs Haven't Hit Wider Economy, IMF Admits

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Dramatic selloffs in crypto have not affected the traditional markets, the International Monetary Fund has admitted.

That comes despite repeated warnings from the IMF that a bear market in digital assets could send shockwaves through the global economy.

In its latest World Economic Outlook, the world bank confirmed that investment vehicles and crypto-focused hedge funds have suffered large losses — but the impact has been largely contained.

Similar sentiments have been made by the Bank of England, but economists have stressed that there is still a threat this could happen in future.

Earlier this month, BoE deputy governor Sir Jon Cunliffe said the technology underpinning cryptocurrencies "has some real potential for use in the financial system" — but digital assets should be subject to the same standards as other financial instruments.

Sir Jon pointed to the collapse of the Terra blockchain — which saw the market caps of LUNA and UST vanish in a matter of days — as an example. He said:
"We do have to get on with the work of putting in place the regulatory framework — same risk, same regulatory outcome. You've just seen the need for that in what happened."

Bigger Fish to Fry

Despite the fact that the IMF has been thoroughly unimpressed with the likes of El Salvador and the Central African Republic embracing crypto, it's fair to say there are much bigger fish to fry.

Inflation is running out of control in many major countries around the world, and the conflict in Ukraine is causing food prices to surge.

Nonetheless, it's clear that the IMF wants to be prepared for if — or when — the next crypto bull run emerges. Especially concerning to regulators is how they've been behind the curve with the latest regulations in this fast-moving space.

With regards to ensuring that any future crypto contagion doesn't end up having an impact on the wider economy, one member of the European Central Bank's supervisory board had an interesting idea. She suggested that old-fashioned institutions with exposure to crypto would need to undergo stress tests to ensure their balance sheet doesn't end up casting a shadow over the wider market.

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