IMF experts have warned that the financial stability risks posed by cryptocurrencies “could soon become systemic in some countries.”

Determining valuation is not the only challenge in the crypto ecosystem: identification, monitoring, and management of risks defy regulators and firms. These include, for example, operational and financial integrity risks from crypto asset exchanges and wallets, investor protection, and inadequate reserves and inaccurate disclosure for some stablecoins, the IMF experts have stated in an article posted on its blog. 

Moreover, in emerging markets and developing economies, the advent of crypto can accelerate what we have called “cryptoization”—when these assets replace domestic currency, and circumvent exchange restrictions and capital account management measures, it adds.

Prime Minister Narendra Modi while speaking at The Sydney Dialogue last month had also said that all countries must work together on cryptocurrency and ensure that it doesn't end up in the wrong hands.

The government plans to introduce a Bill in Parliament to ban private cryptocurrencies as there are fears that there is no transparency in these assets which carry the risk of money laundering and terror financing. Cryptocurrencies also fluctuate widely in value which can cause huge losses to holders in case of a sudden crash.

The RBI has also advised the government to ban cryptocurrencies as they pose a risk to the financial stability of the country.

The government has also decided to look into the issue of misleading advertisements that are being used by promoters of cryptocurrencies to lure buyers.

At the same time the government is not averse to looking at the blockchain technology used in cryptocurrencies to examine if it can improve digital transactions in any way. 

Also read: PM holds meeting on cryptocurrency: Govt to crack down on misleading ads