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IMF warns: Correlation between crypto market and financial market is increasing rapidly in Asia

 


Before the corona crisis, the dividing line between the traditional financial markets and the crypto market in Asia was still quite clear, but it is now becoming increasingly blurred, which is why the International Monetary Fund (IMF) is now recommending appropriate regulation.


In a blog entry from yesterday, Sunday, the IMF economists warn of the current developments on the Asian market, because crypto is apparently being integrated into the existing financial system here at high speed. According to the experts, this creates risks for financial stability. As they state in their letter:


“While the financial sector has been largely isolated from the sharp price movements [of the crypto market] so far, this could change in future price cycles. A domino effect could then spread across a multitude of market participants invested in both traditional and crypto financial products.”

In this context, the authors refer to India, where the correlation between Bitcoin ( BTC ) and the stock market has increased tenfold over the course of the pandemic.


The constant merging of the crypto industry and the financial sector is primarily due to the fact that more and more crypto companies and crypto investment products are being accepted on the stock market and that more and more private and institutional investors in Asia are investing in crypto currencies.


Using their spillover methodology , the IMF economists find that more and more capital is being tied up in the crypto sector in India, Vietnam and Thailand. For this reason, they advise Asian regulators to create “clear guidelines for regulated financial institutions”, to inform and protect retail investors and to cooperate closely across national borders.


On July 27, Tobias Adrian, the IMF's director of capital markets, had already warned that there could be other troubled stablecoins after TerraUST (UST). Accordingly, a “global regulatory approach” is needed to better protect investors.

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