Amidst the controversies surrounding the cryptocurrency market, which are largely based on its acceptability, volatility and governments’ attitude toward it, the International Monetary Fund (IMF) is for the first time, speaking in the interest of the digital asset industry.
The crypto market is currently experiencing one of its most tumultuous moments, forcing a massive selloff of assets by investors. On May 13, the market saw more than $200 billion wiped off as bitcoin fell below $26,000 for the first time in 16 months.
But in a surprising development, the IMF head, Kristalina Georgieva, during the World Economic Forum’s annual meeting on Tuesday, advised investors not to abandon the crypto market despite Terra’s crash.
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In the meeting, she also said the collapse of Terra’s algorithmic stablecoin UST should not make people ditch cryptocurrencies as not all digital currencies are the same.
Kristalina Georgieva believes the crypto market is important as it offers faster service at lower costs and is more inclusive. She went on to say, every investment comes with some level of associated risks and so do cryptocurrencies but with proper research.
Therefore, stablecoins backed by cash and other assets are different from algorithmic stablecoins. Stablecoins are supposed to maintain a 1:1 peg with reserve assets like the US dollar.
The collapse of algorithmic stablecoin TerraUSD or UST caused massive liquidation across the crypto market. This should serve as a reminder to investors to be aware of the potential risks with assets that are not well-backed. Hence, investors should continue to invest in cryptocurrencies.
“I would beg you not to pull out of the importance of this world. It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas. The less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face,” she said.
She also urges regulators across the world to protect investors through crypto education and regulation. Moreover, she warned against volatile crypto products with currencies. Anything not backed by a sovereign guarantee can be an asset class, but not a currency.
Amid the ongoing discussion, the spokesperson for the IMF, Gerry Rice also came to the rescue of crypto that the IMF supported El Salvador in the compilation of statistics about the use of Bitcoin (BTC) to boost the country’s anti-money laundering efforts.
The IMF had notably warned many countries about developing romantic relationships with bitcoin, and was openly against the move by El Salvador and the Central African Republic to adopt bitcoin as a legal tender. This support for cryptocurrency marks a significant shift from the Fund’s previous position and may likely renew waning interest in the digital asset industry.