Economics professor warns “cryptocurrencies could contribute to monetary and financial instability” – Economics Bitcoin News

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Cornell University professor of economics and former head of the IMF’s China division, Eswar Prasad, warned that “cryptocurrencies can contribute to monetary and financial instability.” He added that the risk is magnified if the industry is unregulated and lacks investor protection.

Economist sees crypto pose risks to financial stability

Eswar Prasad, Nandlal P. Tolani Senior Professor of Trade Policy and Professor of Economics at the Charles H. Dyson School of Applied Economics and Management at Cornell University, shared his take on cryptocurrency in an interview with CNBC, released Wednesday.

Prasad is also a Senior Fellow at the Brookings Institution, where he holds the New Century Chair in International Economics, and an Associate Fellow at the National Bureau of Economic Research. He was previously head of the financial studies division of the research department of the International Monetary Fund (IMF) and head of the China division of the IMF.

He said:

Cryptocurrencies can contribute to monetary and financial instability, especially if they spawn a large, unregulated financial system that lacks investor protection.

His statement echoes a recently released IMF report warning that the growing popularity of cryptocurrency could pose a threat to financial stability. Additionally, Bank of England Deputy Governor Jon Cunliffe said this week that regulation is urgently needed as the crypto industry is growing rapidly, and there are “very good reasons “to think that it could pose risks to the country’s finances. stability in the future, although the risks are currently limited.

Professor Prasad was also asked about how cryptocurrencies could worsen economic inequality. “Cryptocurrencies and their underlying technology hold the promise of democratizing finance by making digital payments and other financial products and services readily available to the masses,” he replied. “But because of existing inequalities in digital access and financial literacy, they could end up making the inequalities worse.”

Further, he pointed out that “any financial risk resulting from investing in cryptocurrencies and related products could end up falling particularly heavily on naive retail investors.”

Cornell Professor of Economics also discussed central bank digital currencies (CBDCs), saying:

I believe central bank digital currencies are the way of the future. But every central bank will want to make sure that its money is not being used for illicit purposes, so that transactions will be verifiable and traceable.

However, Prasad noted that “if every payment you make, including for a cup of coffee or a sandwich, can be seen by a government agency, it is an uncomfortable proposition.” The economist concluded: “You could, in a more dystopian world, ask the government to decide what kind of goods and services its money can be used for.”

Do you agree with the economics professor? Let us know in the comments section below.

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