The International Monetary Fund’s director has warned about further selling of crypto assets and equities. He also warned of the possibility that crypto tokens might fail.
IMF foresees more crypto selling pressure
In an interview with Yahoo Finance on Wednesday, Tobias Adrian (director of Monetary and Capital Markets at the International Monetary Fund) warned that there will be more selling pressure and crypto token failures.
He declared:
Further selloffs could occur in both crypto assets and risky asset markets such as equities.
“There could be further failures of some of the coin offerings — in particular, some of the algorithmic stablecoins that have been hit most hard, and there are others that could fail,” he detailed. According to the IMF director, crypto could also drop further in a recession.
The implosions of cryptocurrency terra (LUNA), and stablecoin Terrausd (UST), in May prompted Gary Gensler, Chairman SEC, to warn that many crypto tokens would fail.
Adrian warned of the possibility that fiat-backed stabilitycoins could experience run, which Janet Yellen (Treasury Secretary) and the Federal Reserve also warn about.
Speaking of tether (USDT) in particular, the IMF executive stressed, “There’s some vulnerability there because they’re not backed one to one.” He noted that some stablecoins “are backed by somewhat risky assets,” emphasizing, “it is certainly a vulnerability that some of the stablecoins are not fully backed by cash-like assets.”
Adrian states that he does not believe there is an immediate threat comparable to 2008’s financial crisis.
What was very worrisome in the 2008 crisis was that the banks were highly exposed to the shadow banks, and we don’t see this exposure of banks to shadow banks through crypto at the moment.
In addition, IMF director Adrian noted that regulation is necessary to protect both investors and the financial sector. Adrian made the following comment, referring to the large number of cryptocurrencies that exist:
Regulating the coins themselves is going to be difficult, but regulating the entry points such as exchanges and wallet providers to invest in those coins, that’s something that is very concrete and very feasible.
The IMF also published a report Tuesday stating: “Crypto assets have experienced a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds, but spillovers to the broader financial system have been limited so far.”
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