Friday, December 2, 2022
 

Crypto’s Asian Stocks Alignment Highlights Need for Regulation: IMF

  • The IMF says it sees a growing correlation between crypto and Asian stock markets.
  • This is because Asian investors have been increasingly getting into crypto in the past two years.
  • The IMF thinks this calls for clear regulation.

The International Monetary Fund (IMF) has said in a recent blog post that immediate regulation is required because of the correlation between the movements of cryptocurrency markets and stock markets in Asia, particularly in India, Thailand, and Vietnam.

Economists from the IMF discussed their worries over the dynamics of Asian markets, where it seems that the incorporation of cryptocurrencies into the wider financial system is increasing at a rapid pace.

The experts argued that this presents significant dangers to the continuity of the financial system. They added that even though the financial industry seems to have been shielded from these sudden fluctuations, there is a possibility that this may not be the case in future boom-bust cycles.

The agency said that a contagion might spread via individual or institutional investors who hold both cryptocurrency and conventional financial assets or liabilities. These investors may own both cryptocurrencies and traditional financial assets or liabilities.

“Large losses on crypto may drive these investors to rebalance their portfolios, possibly causing financial-market volatility or even default on traditional liabilities,” the IMF blog reads.

As more and more people in Asia have begun to invest in cryptocurrencies like Bitcoin and Ethereum, there has been a stronger relationship established between the two markets. Although connections between Bitcoin and the Asian equities markets in terms of returns and volatility were relatively weak before 2020, they have strengthened considerably since then, the IMF says.

“They should establish clear guidelines on regulated financial institutions and seek to inform and protect retail investors. Finally, to be fully effective, crypto regulation should be closely coordinated across jurisdictions,” the IMF added.

  • The IMF says it sees a growing correlation between crypto and Asian stock markets.
  • This is because Asian investors have been increasingly getting into crypto in the past two years.
  • The IMF thinks this calls for clear regulation.

The International Monetary Fund (IMF) has said in a recent blog post that immediate regulation is required because of the correlation between the movements of cryptocurrency markets and stock markets in Asia, particularly in India, Thailand, and Vietnam.

Economists from the IMF discussed their worries over the dynamics of Asian markets, where it seems that the incorporation of cryptocurrencies into the wider financial system is increasing at a rapid pace.

The experts argued that this presents significant dangers to the continuity of the financial system. They added that even though the financial industry seems to have been shielded from these sudden fluctuations, there is a possibility that this may not be the case in future boom-bust cycles.

The agency said that a contagion might spread via individual or institutional investors who hold both cryptocurrency and conventional financial assets or liabilities. These investors may own both cryptocurrencies and traditional financial assets or liabilities.

“Large losses on crypto may drive these investors to rebalance their portfolios, possibly causing financial-market volatility or even default on traditional liabilities,” the IMF blog reads.

As more and more people in Asia have begun to invest in cryptocurrencies like Bitcoin and Ethereum, there has been a stronger relationship established between the two markets. Although connections between Bitcoin and the Asian equities markets in terms of returns and volatility were relatively weak before 2020, they have strengthened considerably since then, the IMF says.

“They should establish clear guidelines on regulated financial institutions and seek to inform and protect retail investors. Finally, to be fully effective, crypto regulation should be closely coordinated across jurisdictions,” the IMF added.

 

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