Cryptocurrencies could replace Naira and other developing market currencies 

Cryptocurrencies could replace Naira and other developing market currencies - IMFAccording to the International Monetary Fund, cryptocurrencies pose immediate and serious risks to some emerging markets and currencies in developing economies such as Naira (Nigeria's local currency).

The IMF made this claim in a report released Thursday titled "Global cryptocurrency settlement should be comprehensive, consistent and coordinated." The IMF stated in its report that it has a mandate to maintain the stability of the global financial and monetary system.

Crypto assets present more immediate and acute currency replacement risks in some emerging markets and developing economies such as Nigeria, according to the Washington DC-based fund.

For Africans, only P2P platforms are left

Handling of the flow of capital after “cryptography” will require some fine-tuning. This is because regulating capital flows using consolidated regulatory tools can be very challenging, especially when value is transferred using new tools, new channels and new unregulated service providers ".

Recall, between July 2020 and June 2021 a total of 105,6 billion dollars of crypto assets were traded, with an increase in value of 1.200%. In terms of transaction volume across all regions, Africa leads peer-to-peer (P2P) payment platforms. Africa outperformed peer-to-peer (P2P) payment platforms in terms of transaction volume across all regions.

Considering that most banks in Africa are hostile to cryptocurrency exchanges, Africa has remained with P2P platforms as the only option and has shown relatively growth over the time period under review.

According to the IMF, as policymakers struggle to monitor risks, crypto assets will soon create systemic financial instability in some countries. A crypto asset was drastically changing the entire financial system the organization aimed to protect, he added.

According to the IMF, crypto assets and associated products and services have experienced rapid growth in recent years. Furthermore, the financial system is increasingly interconnected. The IMF revealed that many activities in this area are unregulated and that policy makers have difficulty monitoring their risks. It believes that some of these financial stability risks may soon become systemic in some countries.

“In an environment of stretched valuations, the market capitalization of nearly $ 2,55 trillion could reflect the foam in addition to the value of underlying technology innovations such as blockchain,” the report added.

According to the IMF, regulation is the only way

It is difficult for regulators and companies to identify, monitor and manage cryptocurrency-related risks, the international fund says. According to the IMF, “These risks underscore why we need comprehensive international standards that address the risks that cryptocurrencies, their associated ecosystems and related transactions pose to the financial system, while enabling the development of useful assets and cryptographic applications ".

Crypto's cross-sectoral and cross-border mandate limits the efficiency of national strategies, according to the IMF. In a statement, the body said: "Countries use very different strategies and existing laws and regulations may not be able to cover all aspects of these resources at the national level."

Additionally, many cryptographic service providers operate across national borders, posing a challenge to supervision and enforcement. Destabilizing capital flows could result from uncoordinated regulatory action. According to the IMF, global regulatory frameworks are needed that offer a level playing field across the spectrum of assets and risk.

There was a recommendation to license or authorize crypto-asset service providers that provide critical functions. It is important to clearly articulate the licensing and authorization criteria, to identify the responsible authorities and to establish mechanisms to coordinate their activities. Crypto assets and stablecoins should have requirements tailored to their core use cases.

According to the IMF, there is an urgent need for cross-border collaboration and cooperation to address technological, legal, regulatory and supervisory challenges. The report states that cryptocurrencies have the potential to profoundly change international monetary and financial systems.