IMF: The widespread use of cryptocurrency may cause banks to lose deposits and reduce loans

It is reported that the International Monetary Fund (IMF) has warned G20 countries that the widespread use of encrypted assets may cause banks to lose deposits and reduce loans. The report said: “The widespread use of encrypted assets has brought huge risks to the effectiveness of monetary policy, exchange rate management, capital flow management measures and fiscal sustainability. In addition, central bank reserves and the global financial safety net may need to be changed, resulting in potential instability. Finally, banks may lose deposits and have to reduce lending.” The report also pointed out that, “Although the importance and relevance of specific risks vary from country to country, there are many risks in encryption assets.” However, despite the “significant risks, encryption assets have developed technologies that can be used by the public sector to achieve their own policy objectives”.

Interpretation of this information:

The International Monetary Fund (IMF) has warned the G20 countries about the potential risks that come with the widespread use of encrypted assets. According to the IMF, the use of these assets may cause banks to lose deposits and reduce loans, leading to potential instability. The report highlighted the various risks that come with the use of encrypted assets, including their impact on monetary policy, exchange rate management, capital flow management measures, and fiscal sustainability. The IMF also pointed out that the use of these assets may require changes in central bank reserves and the global financial safety net, further increasing the potential for instability.

Despite these risks, the report acknowledged the development of technologies that can be used by the public sector to achieve their own policy objectives. While the importance and relevance of specific risks may vary from country to country, there are still many risks that come with the use of encrypted assets. Therefore, the IMF urged the G20 countries to take caution when considering the widespread use of these assets and to develop policies that address their potential risks.