The International Monetary Fund has disclosed that feeble national bank believability and a weak banking system in emerging economies can cause cryptocurrencies to show up as a more secure store of value.
The IMF said crypto adoption in some developing economies and business sectors was outperforming that of advanced economies thus, driving a flood of “cryptoisation”.
The body further explained that unstable macroeconomic policies joined with inefficient payment system in some developing economies and business sectors have contributed to the boost of crypto adoption.
The IMF indicated that the dollarisation pressure is a great danger for several developing markets and economies.
It said that the crypto ecosystem can help domestic residents convert some of the headwinds of traditional dollarisation, such as exchange rate restrictions and challenges in assessing and storing foreign assets.
IMF said that given the large share of unbanked people in some emerging markets and developing economies, remittances took place through cumbersome cash-based methods, such as post offices and other transfer operators. The cryptocurrencies could also take advantage of this situation
“Whatever form of achievement is made by adoption of crypto as remittances will have a marginal impact on monetary policy or capital flows as the underlying crypto assets will likely be held for only a short time before it is exchanged into the local currency”.
The increased demand for crypto assets could facilitate capital outflows affecting the foreign exchange market, it added.