The International Monetary Fund (IMF) has warned that a spike in cryptocurrency trading in emerging markets such as Nigeria could imperil the global financial system.
The warning is contained in its Global Financial Stability report, entitled: “The Rapid Growth of Fintech: Vulnerabilities and Challenges for Financial Stability”.
IMF highlighted the increased use of cryptocurrencies in emerging markets since the start of the pandemic, noting that trading volumes of crypto assets against some emerging market currencies have spiked since the West sanctioned Russia.
Tether – the largest stablecoin used to settle spot and derivative trades – has seen a spike in trading volumes against emerging market currencies.
That spike is particularly notable in Turkey, where exchange rate volatility has been high, and the overall use of crypto assets has gained traction over the last few years.
Although a large part of the uptick stems from speculative investors, a shift towards using crypto as a means of payment could create challenges for policymakers, the IMF warned.
The IMF warned cryptocurrency exchanges that don’t comply with sanctions or properly monitor illegal activity could be used to circumvent sanctions. At the same time, they say, the technology crypto uses increases the secrecy of transactions, allowing dealings to be covered up more easily.
