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26th May 2022 > > The ECB and the IMF.


The ECB and the IMF share some of their crypto thoughts with us.

Market Snap (at time of writing)

Market Wrap

Risk assets gently treading water. That double spike in UST yesterday to 30+c was simply a head fake that might have been due to a misunderstanding of the apparent progress being made towards LUNA 2, which has rather split opinions. More to follow perhaps.

Curious Cryptos’ Commentary – ECB Financial Stability Review

Published a couple of days ago, the bi-annual Financial Stability Review has cryptos in its sights:

"If the present trajectory of growth in the size and complexity of the crypto-asset ecosystem continues, and if financial institutions become increasingly involved with crypto-assets, then crypto-assets will pose a risk to financial stability."

Which is a fair enough comment though personally I think the authors stray into doom-mongering territory with this comparison:

"Despite recent declines, they [cryptocurrencies] remain similar in size to, for example, the securitized sub-prime mortgage markets that triggered the global financial crisis of 2007-08.”

The report singularly fails to mention that the sub-prime crisis was enabled by extremely poorly thought-out and badly designed regulation, whilst all the regulatory bodies were asleep at the wheel.

I wonder why the ECB failed to discuss that point?

The report identifies that risk factors include the widespread adoption of cryptos by financial institutions and the growing use of cryptos as a means of payment, both of which are happening right here and right now.

One of their conclusions is a depressingly obvious repetition of the ECB’s default stance (“global coordination of regulatory measures is necessary”).

The one bright spot is that the ECB is urging the EU to immediately implement the Markets in Crypto Assets (MiCA) legislation – see CCC 14th and 15th March 2022 amongst others – though the technocrats at the ECB must surely be aware that the “trilogue” between the three difference executive bodies of the EU (European Commission, European Parliament, and European Council) cannot be finalised in less than twelve months.

Curious Cryptos’ Commentary – International Monetary Fund (IMF)

The IMF has often come in for some harsh, but well-justified, criticism from the CCC for its role in impoverishing nations which are in financial difficulties to begin with, its patent groupthink that permeates the entire institution, and its controlling culture.

To which I have been able to add its animosity towards cryptos amply demonstrated by its immediate criticism of El Salvador when that country made BTC legal tender.

But surprising things can happen.

Kristalina Georgieva, managing director of the IMF, had this to say at the World Economic Forum in Davos on Monday:

"I would beg you not to pull out of the importance of this [crypto] world.

It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas."


She also demonstrated some understanding of the difference between asset-backed stablecoins and algorithmic stablecoins:

"The less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face."

Spoken like a banker who understands risk, a species of which until now the IMF seemed to be in rather short supply.

Much more of this and I am going to have to start being supportive of the IMF, a previously unthinkable stance for me to take.

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