In an interview with Yahoo Finance, the institution’s director of money and capital markets is pessimistic about the future of the market.
While the cryptocurrency market is experiencing a period of calm with the rebound of the two main cryptocurrencies Bitcoin and Ethereum, the International Monetary Fund (IMF) is more pessimistic.
After the last two crypto crashes in May and June that saw bitcoin and ether lose more than 60% of their value from their all-time highs, the organization expects further declines.
“We may see further crashes in both crypto assets and markets for risky assets such as equities,” Tobias Adrian, director of money and capital markets at the IMF, told YahooFinance. “Further failures are possible for some tokens – in particular, some algorithmic stablecoins that have been hit the hardest, and there are others that may fail.”
Recall that many so-called algorithmic stablecoins have been weakened in recent months, the main one being the stablecoin Terra Usd (ust) on the Terra Luna blockchain, which collapsed in mid-May.
The IMF member also refers to classic stablecoins, which are not immune to further weakening in the future. In particular, this applies to Tether and its USDT stablecoin.
Some stablecoins are “backed by somewhat risky assets… The fact that some stablecoins are not fully backed by monetary assets is definitely a vulnerability,” he said.
As a reminder, a stablecoin (or stablecoin) is a crypto asset (or digital asset) pegged to a fiduciary currency such as the euro or dollar. A stablecoin can also be backed by other assets (such as gold). This is called the backbone of the stablecoin.
Faced with anticipation of these new market turmoil, Tobias Adrian is calling for regulation of cryptocurrencies in the same way as other institutions, notably the European Central Bank (ECB).
“There are 40,000 cryptocurrencies on the market,” Tobias Adrian calculated. “Regulating cryptocurrencies themselves will be difficult, but regulating hotspots like exchanges and wallet providers. […]it’s something very specific and very doable.”