IMF says sanctions on Russia could boost the use of crypto

    02 Apr 2022

    As the Russian invasion of Ukraine enters its second month, Gita Gopinath, the International Monetary Fund (IMF) official, has warned that the financial sanctions imposed on the invading country, including restrictions on its central bank, could have some wide-reaching effects on currencies. With this, the Chinese yuan and cryptocurrencies could see their adoption accelerate with the war.

    Gita Gopinath, the first deputy managing director at the IMF, believes that are indications that some countries have begun “renegotiating the currency in which they get paid for trade,” she said in an interview with Financial Times on March 31.

    “The dollar would remain the major global currency even in that landscape, but fragmentation at a smaller level is certainly quite possible,” she said.

    In Gopinath’s words, the current situation could encourage the adoption of currencies other than the US dollar, including cryptocurrencies ranging from stablecoins to central bank digital currencies (CBDCs), worldwide.

    She also warned of the lack of regulation around cryptocurrencies and the need to address this issue before their wider adoption:

    “All of these will get even greater attention following the recent episodes, which draws us to the question of international regulation. There is a gap to be filled there,” she claimed.

    On February 24, the day that Russian forces entered Ukraine, the crypto market reacted with an immediate sell-off that led to losses of more than half a trillion dollars.

    Later, the market has made a remarkable recovery, with the price of Bitcoin, its flagship asset, marching in an upward trend – increasing as much as 35% since the beginning of the invasion and pushing the growth of the entire market’s capitalization with it, which currently stands at $2.12 trillion.

    Noteworthy that cryptocurrencies have proven their utility as the means of procuring assistance to the invaded people and their military. Recently, the donations for Ukraine made in crypto have surpassed $100 million.

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