A visual presentation of cryptocurrency.
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The International Monetary Fund concerns about cryptocurrencies, especially since the nascent market is growing at a remarkable rate and regulations are not followed.
The total market value of all crypto assets surpassed $2 trillion in September of this year — a 10x increase from the level seen at the start of 2020, data collected by the IMF shows.
Evan Papageorgiou, deputy director of the IMF’s division, told CNBC in October that “the crypto ecosystem has grown significantly… The process shows significant resilience but also some testing. interesting tension.”
One of the problems the IMF has highlighted is that many people and financial institutions that trade these assets “lack strong operating, governance and risk practices.”
So, Foundation said that consumers are at risk, adding that there is simply “insufficient disclosure and oversight” in this area. Furthermore, it believes that crypto-assets create a number of “data gaps” and “could open unwanted doors for money laundering, as well as terrorist financing.”
Is different Institutions has been calling for more action to make these investments safer. Cryptocurrencies can be a divisive topic, with some arguing that they are the future of money and others making more skeptical arguments about their risks.
Cryptocurrency influencers
The UK’s financial regulator, the FCA, has warned of a link between social media and crypto investments.
“Social influencers are often paid by scammers to help them pump and sell new tokens based on pure speculation. Some influencers promote simple coins is non-existent,” Charles Randell, the president of the FCA, said in a statement in September.
He added that given how new the technology is, “we haven’t seen what will happen in a full financial cycle. We simply don’t know when or how this story will unfold. ending, but – as with any new speculation – it could end badly.”
Kim Kardashian, a celebrity with over 200 million followers on Instagram, was paid to promote crypto tokens on her account earlier this year. Critics emphasize that few details are known about the developers of ethereummax, the currency she advertised. “This is not financial advice but to share what my friends have told me about ethereum max tokens!” post from Kardashian read. She added various hashtags, including #ad, required to reveal that her posts were paid.
Other social media users with huge followings, known as influencers, have also advertised crypto assets on their accounts.
Myron Jobson, a personal finance campaigner at Interactive Investor, told CNBC in October: “Cryptocurrencies are often advertised alongside these flashy lifestyle deployment posts, and I think that association. very dangerous and harmful to young people.
Standardize
He said that policymakers need to review the advertising of cryptocurrencies and ensure that they explain to people the risks involved in investing in such a volatile asset. Prices can fluctuate wildly even within a single trading day.
Another problem for policymakers is that young people are very interested in this market and often invest in cryptocurrencies for the first time, using loans and credit cards to do so.
Data released by the FCA in June shows that around 2.3 million people in the UK hold crypto. 14% of them use credit to buy them and 12% of them think they will be covered by FCA if something goes wrong. But the FCA has said it will not protect them.
ONE poll Among 1,000 UK adults aged 18 to 29 it was found in July that 27% of them used a credit card to invest in the dogecoin crypto meme, 17% used their student loans. and 12% said they used other types of loans.
This can become a double-edged sword as investors can face losses on their crypto and then struggle to pay back the loans and credits they made. those investments.
According to the IMF, national regulators should work to have common rules globally, strengthen cross-border surveillance and, as this is a new area, promote data standardization.
The IMF said in October: “Time is of the essence and action needs to be decisive, swift and well coordinated globally to enable the benefits to be delivered while also addressing the gaps.” “.
—By CNBC’s Taylor Locke who contributed to this article.
