IMF analysts expressed their worries about the dynamics of Asian markets in a blog post dated August 21, where it appears that the integration of cryptocurrencies into the wider financial system is expanding quickly. The analysts noted that this presents some dangers to financial stability and added,
“While the financial sector appears to have been insulated from these sharp movements, it may not be in future boom-bust cycles.” Contagion could spread through individual or institutional investors that may hold both crypto and traditional financial assets or liabilities.”
The economists also used the Indian market as an illustration, where the return correlations between Bitcoin (BTC) and the local stock market have multiplied tenfold since the epidemic.
The increasing acceptance of platforms and investment vehicles related to cryptocurrencies in the stock market, as well as the increasing adoption of cryptocurrencies by retail and institutional investors in Asia, is thought to be the driving force behind the tightening relationship between cryptocurrencies and traditional finance.
However, the experts discovered a high increase in spillovers of crypto-equity volatility in India, Vietnam, and Thailand using the approach for determining spillovers they devised for their Global Financial Stability Note.
Finally, it is advised that Asian regulators “create clear criteria on regulated financial institutions,” educate and safeguard regular investors, and closely coordinate their initiatives across jurisdictions.
Meanwhile, iexclusivenews Nigeria reports that Tobias Adrian, the IMF’s head of capital markets, warned that algorithmic stablecoins could continue to fail on July 27. To properly safeguard investors, stablecoins require a “global regulatory strategy”.
