The International Monetary Fund (IMF) has warned that crypto currencies’ high volatility and valuation, and their competitiveness with equity markets will soon pose risks to financial stability in countries with widespread crypto adoption.
The Brettonwood institution gave the warning in a blog post with the title, ‘Crypto Prices Move More in Sync with Stocks, Posing New Risks’.
The 2021 Global Crypto Adoption Index, indicates that Nigeria is the sixth leading country globally with regards to cryptocurrency adoption while Vietnam, India, and Pakistan, in that order, are the top three countries.
In its latest post, IMF said crypto assets are no longer on the sidelines of the financial system, noting that there was “an increasing and sizable co-movement between crypto and equity markets that could cause shock, destabilising financial markets.”
According to the IMF, the stronger association between crypto and equities was apparent in emerging market economies, most of which are leading in crypto-asset adoption.
“The increased and sizable co-movement and spillovers between crypto and equity markets indicate a growing interconnectedness between the two asset classes that permits the transmission of shocks that can destabilise financial markets.” IMF said.
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