The IMF Warns of Further Crypto Selloffs and More Coins Could Fail

The IMF Warns of Further Crypto Selloffs and More Coins Could Fail

The Director of Monetary and Capital Markets at the International Monetary Fund (IMF) has warned of further selloffs in both crypto assets and equities. He further warned that more crypto tokens could fail.

The IMF Anticipates More Crypto Selling Pressure

In an interview with Yahoo Finance on Wednesday, 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. He said,

"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 explained. The IMF Director also expects crypto to drop even further amid a recession.

In May, cryptocurrency terra (LUNA) and stablecoin terrausd (UST) imploded, prompting SEC Chairman Gary Gensler to warn that a lot of crypto tokens will fail.

Speaking of tether (USDT) in particular, the IMF Director summed up, "There’s some vulnerability there because they’re not backed one to one." He noted that some stablecoins "are backed by somewhat risky assets," elaborating, "It is certainly a vulnerability that some of the stablecoins are not fully backed by cash-like 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 very concrete and very feasible."

The IMF also published a report on Tuesday, "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."