According to an IMF blog, the correlation between Asia’s equity markets performance and crypto assets has grown as crypto investors from that region have piled into crypto over the past few years.
According to the IMF, the volatility correlations between Bitcoin markets and Asian equity markets have significantly increased since 2020, prior to the pandemic.
The pandemic has seen the Asian return correlations between Bitcoin and Indian stock market increased 10 times. According to IMF, this means that crypto offers limited risk diversification benefits.
As volatility correlations have increased threefold, it could lead to a rise in risk sentiment on the equity and crypto markets.
According to the IMF, “Crypto trading however, rose as millions stayed home receiving government aid, while low rates of interest and easy financing conditions also played roles.”
According to the IMF the factors contributing to increased interconnectedness between crypto and equity markets in Asia could include the acceptance of crypto-related platforms, investment vehicles in stock market and over-the-counter markets and increasing acceptance of these platforms.
According to the IMF, their research revealed that there was a sharp rise in volatility in India, Vietnam, and Thailand due to crypto-equity correlations.
After the widespread spread of crypto worldwide, authorities in Asia became more aware and vigilant to the growing dangers posed by the phenomenon.
Authorities have increased their focus on crypto regulation to do this. The building regulatory framework is currently under construction in all the countries listed above.
The IMF stated, “A substantial effort is also necessary to address important information gaps that still prevent domestic or international regulators fully understanding ownership and usage of crypto and its interconnection with the traditional finance sector.”
The IMF supports clear guidelines regarding regulated financial institutions. They also want to protect retail investors.
According to the IMF, “Regulatory frameworks in Asia for crypto should be tailored to the principal uses of such assets within the nations.”
To be truly effective, the IMF added that crypto regulation must be tightly coordinated across jurisdictions.
December’s total market value for crypto assets worldwide was $3 trillion. This is a 20-fold increase in just one year and a quarter. It plunged to $1 trillion in June, as low-cost borrowing was made impossible by central bank interest rate increases.
The IMF also advised nations not to adopt Bitcoin as a legal tender in order to avoid central bank-issued currency.
Blockchain.News reports that the IMF stated that crypto assets were an anti-establishment movement and threatened central banks’ power and monopoly of the money supply. The IMF warned of the risks that Bitcoin use could have on financial stability, consumer protection, and financial integrity.
Kristalina Georgieva is the IMF’s Managing Director. She has stated that countries should not embrace each other. Cryptocurrency As money in the economy.
Georgieva however, has identified the Central Bank Digital Currency(CBDC), as the best innovation to improve a country’s finances. As she cautioned that it is not wise to use volatile crypto currencies as money, the executive said “The future money is a key topic at IMF’s spring Meetings.”
Source: Shutterstock
