Don’t Turn Your Back on Crypto Yet - IMF
(30 May 2022 – Switzerland) International Monetary Fund (IMF) Managing Director Kristalina Georgieva strongly encourages market participants to avoid outright dismissing cryptocurrency technology after the sudden collapse of stablecoin TerraUSD (UST) this month.
TerraUSD imploded earlier this month, sparking a contagion event that cut the overall value of the cryptocurrency market by billions of dollars. Ms Georgieva stated there were many types of assets with varying levels of associated risk. For instance, there was a significant difference between Stablecoins that are backed by cash and other assets and those that rely on algorithms to maintain their value, such as UST.
Stablecoins are a type of cryptocurrency that are supposed to maintain a pegged value to a reserve asset such as the US dollar. It is the responsibility of regulators across the globe to guide regulation and provide education to protect investors however stakeholders have undoubtedly lost trust in crypto more than in central banks as a result of explosive recent events.
“I would beg you not to pull out of the importance of this world. It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas. The less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face but not all digital money should be tarnished with the same brush” IMF Head Kristalina Georgieva said at the Davos World Economic Forum (WEF) conference.
Federal Reserve Vice Chairwoman Lael Brainard told House lawmakers that a US central bank digital currency (CBDC) could one day provide consumers with a level of safety amid a proliferation of privately-issued digital assets such as Stablecoins. “It could provide a safe, central bank liability as the neutral settlement layer in the digital financial ecosystem. It would actually facilitate and enable private sector innovation.”