IMF chair advises against abandoning cryptos after the Terra drama

• According to the IMF chair, cryptos play a crucial role in the global financial system as it offers faster transactions, cheaper fees, and more inclusion.

• According to her, crypto regulation and education are two important things that must be prioritized to protect investors. 

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Over $500 billion has been wiped off the crypto value in the last month following the mass sell-off triggered by the Terra destruction. Many cryptos are still in red with Bitcoin falling below $30,000. As for Luna,  the project has been completely abandoned by the community after a drastic fall.

This pullback is expected to continue as the US aims to implement some monetary policies including hiking interest rates to control its fast-rising inflation. However, International Monetary Fund (IMF) Chair Kristalina Georgieva believes that it is unfair to abandon the crypto ecosystem at this point. Speaking at the World Economic Forum’s annual meeting in Davos, she stated that the failure of the TerraUST should not be the reason for people to ditch the entire market. 

According to Georgieva, cryptos play a crucial role in the global financial system as it offers faster transactions, cheaper fees, and more inclusion. The TerraUST is categorized under the algorithmic stablecoin. Its process of operation is very different from the likes of USDT and USDC. Stablecoins are designed to maintain a 1:1 peg with a reserve currency like the USD. However, Algorithmic stablecoins are supported by algorithms. 

Not all cryptos are the same – IMF chair

In her statement, Georgieva clarified that not all cryptos are the same.

I would beg you not to pull out of the importance of this world. It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas.

The recent occurrence in the market has been used against the lovers of this asset class, as it is criticized for the level of risk it imposes. However, the IMF chair explained that every investment asset comes with a level of risk. Also, investors are to consider some of these risk levels by avoiding less backed assets. 

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

In her statement, she joined the key players who have been pushing for regulations to protect investors. According to her, crypto regulation and education are two important things that must be prioritized to protect investors. 

One other aspect of cryptos that has generated a lot of arguments is its currency status. Georgieva cautioned that people should not confuse crypto products with currencies. If the product in question has no sovereign guarantee, it can only qualify as an asset class, but not currency. 

Recently, the European Central Bank President Christine Lagarde stated that cryptos are worthless and so must be strictly regulated. Digital assets especially Bitcoin have been said to have no intrinsic value, but a representation of speculations.