The growing popularity of cryptocurrencies such as bitcoin or ethereum, whose market value has reached five-fold in the last five years, reaching 3 trillion dollars (2.6 trillion euros), as well as the increasing correlation of these assets with traditional investments such as Equities point to a capacity to destabilize markets that needs to be addressed with a global regulatory framework, according to the International Monetary Fund (IMF).
According to the institution’s calculations, the market value of these new assets rose to almost $ 3 trillion last November from about $ 620 billion (547.221 million euros) in 2017, although the market capitalization had been reduced in 2022 to around 2 trillion dollars (1.7 trillion euros), which still represents an increase of almost four times since 2017.
Also, in addition to the increased popularity and adoption of crypto assets, the IMF stresses that the correlation of these with traditional investments such as equities has increased significantly, which limits the perceived benefits of risk diversification and increases the risk of contagion in financial markets.
In this sense, the institution points out that this increase in the correlation between stocks and crypto increases the possibility of contagion between the different asset classes, as suggested by the substantial rise in the indirect effects of prices and the volatility of bitcoin on the stock markets , and vice versa, between 2020-21 compared to 2017-19.
The greater and considerable joint movement and the indirect effects between crypto markets and exchanges indicate a growing interconnection between the two asset classes that allows the transmission of ‘shocks’ with the capacity to destabilize financial markets.
"Our analysis suggests that crypto assets are no longer on the fringes of the financial system", says Tobias Adrian, the institution’s chief financial advisor and director of the Monetary and Capital Markets Department, for whom, given its volatility and relatively high valuations, its fluctuations could soon pose risks to financial stability.
Therefore, IMF believes it is time to adopt a global regulatory framework "comprehensive and coordinated" to guide national regulation and supervision and mitigate risks to financial stability arising from the crypto ecosystem.
In this sense, he proposes that such a framework should encompass regulations tailored to the main uses of crypto assets and establish clear requirements for regulated financial institutions regarding their exposure and commitment to these assets.
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