IMF Crypto Report_00.1
UPSC Exam   »   How to Prepare for UPSC CSE Mains Examination: Step-by-Step Guide for Beginners   »   IMF Crypto Report

IMF Crypto Report

 

Relevance

  • GS 3: Science and Technology- developments and their applications and effects in everyday life.

 

Context

  • IMF in its latest Global Financial Stability Report has warned that the digital currencies, besides providing new opportunities, poses significant financial security challenges.

 

What are cryptocurrencies?

  • A cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions.
  • They operate independently of a central bank.

 

IMF Crypto Report_50.1

 

Benefits

  • The rapid growth of the crypto ecosystem presents new opportunities.
  • Technological innovation like cryptocurrencies is making payments and other financial services cheaper, faster, more accessible, and allows them to flow across borders swiftly.
  • Crypto asset technologies have the potential as a tool for faster and cheaper cross-border payments.
  • Bank deposits can be transformed to stable coins that allow instant access to a vast array of financial products from digital platforms and allow instant currency conversion.
  • Decentralised finance like cryptocurrencies could become a platform for more innovative, inclusive, and transparent financial services.

 

Patents (Amendment) Rules, 2021

 

Challenges to financial stability

  • Volatility: Bitcoin could lead to instability because it is extremely volatile. It was trading above 65,000 just about earlier this year, and then it came down to below 30,000.
    • It is much more volatile than equities or commodities or even exchange rates.
  • High transaction costs: Transaction costs can be fairly expensive and compared to digital money.
    • For example: In India, we have RTGS (Real-Time Gross Settlement) payment system. It is slow because it’s a distributed ledger and to know about the status of any transaction, it has to be verified on many computers. So, it’s not that instantaneous, and it can be expensive to transact, besides being extremely volatile.
  • Operational and financial integrity risks from crypto asset providers, investor protection risks for crypto-assets, and inadequate reserves and disclosure for some stable coins.
  • Crypto assets can accelerate cryptoisation and circumvent exchange and capital control restrictions.
    • Increased trading of crypto-assets in these economies could lead to destabilizing capital flows.

 

Stablecoins

Steps needed

  • Policymakers should implement global standards for crypto-assets and enhance their ability to monitor the crypto ecosystem by addressing data gaps.
  • As the role of stable coins grows, regulations should correspond to the risks they pose and the economic functions they perform.
  • Emerging markets faced with cryptoisation risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies.

 

 

Sharing is caring!

×

Download success!

Thanks for downloading the guide. For similar guides, free study material, quizzes, videos and job alerts you can download the Adda247 app from play store.

Thank You, Your details have been submitted we will get back to you.

Was this page helpful?

Leave a comment

Your email address will not be published. Required fields are marked *

Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Login

OR

Forgot Password?

Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Sign Up

OR
Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Forgot Password

Enter the email address associated with your account, and we'll email you an OTP to verify it's you.


Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Enter OTP

Please enter the OTP sent to
/6


Did not recive OTP?

Resend in 60s

Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Change Password



Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Almost there

Please enter your phone no. to proceed
+91

Join India's largest learning destination

What You Will get ?

  • Job Alerts
  • Daily Quizzes
  • Subject-Wise Quizzes
  • Current Affairs
  • Previous year question papers
  • Doubt Solving session

Enter OTP

Please enter the OTP sent to Edit Number


Did not recive OTP?

Resend 60

By skipping this step you will not recieve any free content avalaible on adda247, also you will miss onto notification and job alerts

Are you sure you want to skip this step?

By skipping this step you will not recieve any free content avalaible on adda247, also you will miss onto notification and job alerts

Are you sure you want to skip this step?