The recent report published by the International Monetary Fund (IMF) called the “World Economic Outlook: Challenges to Steady Growth”, states that the rapid growth of Bitcoin and crypto could impact the international finance system.
While the bear market has caused the cryptocurrency values to decline almost by 80%, the mainstream adoption of the digital assets in terms of institutionalization, regulation, and development has been on a steady rise. The report states:
“Cybersecurity breaches and cyberattacks on critical financial infrastructure represent an additional source of risk because they could undermine cross-border payment systems and disrupt the flow of goods and services. Continued rapid growth of crypto assets could create new vulnerabilities in the international financial system.”
Most of the existing companies in the Eco-system such as Coinbase and Gemini, has taken steps that are aimed at strengthening the overall infrastructure of the cryptocurrency market. Major institutional institutions in the like of NYSE, Cboe, and Goldman Sachs have boarded the wagon as week. This has lead to involvement of both high profile retail traders and institutional investors.
While envisioning the growth is a happy concept, but there are always contradictions. The exponential growth has the IMF worried that this could create vulnerabilities in the financial system. Jeon Ha-jin, the chairman of South Korea Blockchain Association said.
“Stealing cryptocurrencies is similar to stealing cash, and exchanges will continue to be targeted by hacking attacks in the long-term. It is as important to establish systems to deal with the aftermath of hacking attacks as integrating various methods to prevent hacking attacks.”
The third llargest cryptocurrency exchange market behind the US and Japana, South Korea have initiated insuring their funds through insurance providers like Samsung to add an additional layer of security and investor protection. Coinbase and Gemini have also availed the insured services from Aon to insure the funds that can be covered in the unlikely event of a security breach.
Gemini’s Head of Risk,Yusuf Hussain, said:
“Consumers are looking for the same levels of insured protection they’re used to being afforded by traditional financial institutions. Educating our insurers not only allows us to provide such protections to our customers, but it also sets the expectation for consumer protection across the crypto industry.”
Notably, the cryptocurrency industry and infrastructure employed by exchanges are definitely based on the traditional finance sector, but due the nature of the asset a lot of changes both fundamentally and technologically have been implemented. For instance, the aforementioned report of claiming cryptocurrencies a risk to global finance is acceptable in this market but no such report would enter or be entertained in the traditional market.
While the report does hold some truthful conclusions, it is also important to note what the optimists say. According their optimism, the current efforts of evolving and strengthening the market shall eventually redeem the clouds of conspicuousness around crypto.