According to Cointelegraph: A recent working paper put forth by the International Monetary Fund (IMF) introduces a country-level Crypto-Risk Assessment Matrix (C-RAM) aimed at detecting potential risks associated with cryptocurrencies, thereby guiding regulatory responses. The paper, titled "Assessing Macrofinancial Risks from Crypto Assets", was published by the IMF on September 29.
The proposed C-RAM follows a three-step approach. The initial phase involves using a decision tree to evaluate crypto's "macro-criticality", or its possible impact on the macro-economy. The subsequent step involves examining indicators similar to those employed in monitory the traditional financial sector. The final phase tackles the global macro-financial risks that might influence a country's systemic risk assessment.
The authors, Burcu Hacibedel and Hector Perez-Saiz, applied C-RAM to El Salvador as a case study – the first county to declare Bitcoin a legal tender in September 2021. As per the paper, the Central American country's usage of Bitcoin presents market, liquidity, and regulatory risks, potentially destabilizing its financial framework, and affecting significant remittances and other capital inflows.
Historically, the IMF has advised against El Salvador's adoption of Bitcoin due to significant risks including financial stability, consumer protection, and financial integrity. As cryptocurrencies continue to evolve, regulators worldwide are updating their risk mitigation strategies to better address the burgeoning asset class. Earlier in September, the IMF and the Financial Stability Board collaborated on a joint paper outlining policy proposals in response to an appeal by the Indian G20 presidency. The paper provided consolidated recommendations to navigate multiple risks associated with crypto activities.
