The head of the International Monetary Fund (IMF) stated at the World Economic Forum in Davos that despite the recent failure of a popular stablecoin, people should not avoid cryptocurrencies entirely.
Kristalina Georgieva feels that the cryptocurrency market plays a key role in the global financial system because of the fact that it offers faster service at cheaper costs and is more inclusive.
“I would beg you not to pull out of the importance of this world,” the IMF managing director said at the WEF meeting in Davos.
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IMF Head Aware Of Crypto Risks
The IMF chief continued by stating that all investments include some degree of risk, including cryptocurrency.
TerraUSD, or UST, crumbled earlier this month, triggering a chaotic domino effect that reduced the market’s overall worth by hundreds of billions of dollars.
Stablecoins are a type of cryptocurrency designed to preserve parity with a reserve asset, such as the U.S. dollar.
TerraUSD, or UST, disintegrated earlier this month, setting off a chain reaction that cut the whole value of the cryptocurrency market by hundreds of billions of dollars (Coin News).
During the WEF in Davos, Georgieva pleaded with attendees not to disregard the value of the global community.
“It gives us all speedier service, far cheaper costs, and greater inclusiveness, but only if we separate apples from oranges and bananas,” the IMF boss noted, adding that it was the role of regulators around the world to erect barriers and provide investor education.
Georgieva also cautioned against the use of risky cryptocurrency-based products. She stated that anything not backed by a governmental guarantee can be a type of assets, but not a currency.
Broader Understanding Of Crypto Needed
“The less backing it has, the more willing people should be to bear the risk of it blowing up in your face,” Georgieva remarked in reference to stablecoins. She emphasized, though, that not all forms of digital currency should be painted with the same brush.
Georgieva emphasized that when people look at stablecoins, it is the area where “the big mess happened … If a stablecoin is backed with assets, one to one, it is stable.”
In response to the continuing crypto issue, Gerry Rice, a representative for the IMF, came to the defense of crypto assets by stating that the IMF assisted El Salvador in compiling statistics regarding the use of Bitcoin to enhance the country’s anti-money laundering efforts.
Crypto total market cap at $1.26 trillion on the daily chart | Source: TradingView.com
Global Economy Still Secure
Meanwhile, Georgieva warned at the start of the WEF that the global economy confronts its “worst test since World War II.”
She stated that Russia’s incursion had “devastated lives, slowed economic progress, and increased inflation.” However, Georgieva stated on the sidelines of the event that the global economy may still avoid a severe downturn.
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Featured image from Economic Times, chart from TradingView.com