The International Monetary Fund (IMF) director has issued a warning about further selloffs in both stocks and crypto assets. He added that more cryptocurrency tokens might fail.
Tobias Adrian, director of Monetary and Capital Markets for the International Monetary Fund (IMF), warned about further selling pressure in the crypto market and more crypto token failures in an interview with Yahoo Finance Wednesday.
We could see further selloffs, both in crypto assets and in risky asset markets, like equities.
“There could be further failures of some of the coin offerings — in particular, some of the algorithmic stablecoins that have been hit most hard, and there are others that could fail,” he detailed. The IMF director also expects crypto to drop even further amid a recession.
The collapse of the cryptocurrencies Terra (LUNA) and Terrausd (UST) in May led SEC Chairman Gary Gensler to issue a cautionary statement about the likelihood of many other crypto tokens failing.
Adrian also expressed concern about the possibility of runs on fiat-backed stablecoins, which the Federal Reserve and Treasury Secretary Janet Yellen have also expressed concern about.
The IMF executive emphasized that there is a vulnerability with tether (USDT) in particular because they are not backed one to one. It is undoubtedly a vulnerability that some stablecoins are only partially backed by cash-like assets, he said, pointing out that some stablecoins “are backed by somewhat risky assets.”
Nonetheless, Adrian does not see an immediate threat on par with the 2008 financial crisis, stating:
What was very worrisome in the 2008 crisis was that the banks were highly exposed to the shadow banks, and we don’t see this exposure of banks to shadow banks through crypto at the moment.
Moreover, the IMF director noted that regulations are needed to protect investors and the financial system. Noting the sheer number of cryptocurrencies in existence, Adrian opined:
Regulating the coins themselves is going to be difficult, but regulating the entry points such as exchanges and wallet providers to invest in those coins, that’s something that is very concrete and very feasible.
The IMF also published a report Tuesday stating: “Crypto assets have experienced a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds, but spillovers to the broader financial system have been limited so far.”