An International Monetary Fund (IMF) division chief and deputy managing director are calling for more action to be taken in the regulatory aspect to avoid crypto’s ups and downs affecting banks and traditional financial institutions. Nobuyasu Sugimoto, deputy division chief of the financial supervision and regulation division of the IMF, and Bo Li, deputy managing director at the IMF, believe that, given the growing links between legacy finance and crypto, cryptocurrency’s volatility might bring systemic risks to the existing markets.

Regulating these markets is one of the elements to prevent this from happening, according to the authors, who also indicate that investors in developed markets have been flocking to some of these assets due to the returns they offer. The IMF Blog post states:

Advanced economies are also susceptible to financial stability risks from crypto, given that institutional investors have increased stablecoin holdings, attracted by higher rates of return in the previously low-interest rate environment.