Several key economists at the IMF are deeply concerned about crypto’s increasing influence on equities.
Cryptos were not taken seriously in the beginning and stocks reigned supreme. Shares therefore had nothing to fear from these digital currencies. How different it is now, where cryptos are worth a lot. The digital coins were also used to hedge other types of assets, such as stocks or gold. But now the prices of the cryptos more and more reflect the stocks.
IMF economists worry about crypto
Economists Adrian Tobias, Tara Iyer, and Mahvash S. Qureshi write about this in a blog by the IMF. It says “the increased and extensive co-movement and spillovers between crypto and stock markets indicate an increasing interconnectedness between the two asset classes. This allows for the transfer of ‘shocks’ that could destabilize the financial markets.”
They point to a new study by one of the economists, which shows that there is a risk of contagion across financial markets. That would mean if something goes wrong with the cryptos that everything goes wrong. Their solution is not surprising: the trio advocate a global regulatory framework to mitigate threats to financial stability.
That must be the solution! Even more rules. And of course more influence for the IMF, but that aside. Stock markets already know this and are regulated by their host countries. That is not the case with digital currencies. The economists believe that any regulatory framework should include requirements for banks about their exposure to crypto assets. This could be one of the solutions, according to the IMF.