The IMF View On Crypto Stability – And How Centric Supports This View

By  //  December 15, 2021

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As of September 2021, crypto assets had surpassed a total market value of $2 trillion, which is ten times that of what it was at the beginning of 2020. With a flourishing network that is complete with wallets, exchanges, miners, and stablecoin issuers.

Unfortunately, a vast number of entities lack strong risk and operational practices as well as formidable governance. With regards to crypto exchanges, notable disruptions have been faced during periods where the market has experienced exceptional turbulence.

With the recent hacking of high-profile accounts and the theft of customer funds that resulted from it, crypto traders are at a high risk. Despite the fact that these instances have borne no substantial impact on financial stability, the importance of potential implications for the broader economy will increase, especially as crypto assets are becoming more mainstream. 

Crypto Traders Cautioned On Currency Volatility 

The International Monetary Fund has cautioned digital coin traders of the considerable hurdles that cryptocurrency still poses on global market conditions despite the platform having the ability to improve on the current global payment systems.

As per the latest released Global Financial Stability Report, the fund explained that risks rooting from the spike in crypto trading as well as the proliferation of digital cash “appear contained for now,” but they ought to be observed strictly.

The report quoted that “Challenges posed by the crypto ecosystem include operational and financial integrity risks from crypto asset providers, investor protection risks for crypto assets and DeFi, and inadequate reserves and disclosure for some stablecoins,” 

The IMF report also stated that as the adoption of cryptocurrency grows, the risks and impacts that it could have on the current economic growth as well.

The international fund is not alone in its call for more oversight and placed emphasis on the fact that crypto lacks the adequate regulations and deficiencies in the way it is structured to operate, in particular the decrease that occurs in exchanges during significant selloffs.

The US Working Group on Financial Markets has proposed to the Biden Administration, a new regulatory legislation for stablecoins, which will ensure that they follow the same rules and regulations as banks.

As the use of stablecoin grows alongside cryptocurrency, the IMF errs on the side of caution as it has the potential to cause significant harm to fiscal policies by enabling tax evasion. The anonymity that comes with crypto assets creates data gaps which is a problem for regulators and opens the gateway for money laundering as well as terrorist financing. Even though authorities have the ability to track illicit transactions, it does not ensure that they will be able to identify the parties to the transactions.

Due to most crypto exchange transactions happening via entities that operate through offshore financial centers, supervision becomes next to impossible along with any form of enforcement, without the assistance of international authorities.

Stablecoins Explained

Stablecoins are cryptocurrencies whose values are held down to fiat currencies such as the American dollar, metals such as platinum and gold, or via short-term securities as a means to mitigate the volatility of cryptocurrencies.Due to the premium that volatility carries, the lack of price steadiness has hindered the establishment of credit and debt markets. Whilst the rest of the crypto world places its focus on transaction outputs and smart contracts, Centric shifts its focus and places emphasis on price stability so as to achieve the complete financial potential of the blockchain.

Centric’s Self Stabilizing Crypto Currency

Centric, however, is a crypto currency that has disrupted the market, has a nominal value that remains steady, and does not go through “effective” price fluctuations due to Centric Swap (CNS) which is an ecosystem that is freely traded. The value is supported by the means of its projected price progression as well as applications that utilize Centric Rise as its currency.

This is how Centric rise addresses the volatility and turbulent price fluctuations that are often seen with first-generation cryptocurrencies such as Ethereum and Bitcoin, whilst staying independent from underlying assets such as the US dollar and precious metals. The elimination of this dependency results in Centric Rise being remarkably different from any other digital asset that we have seen thus far.

In order to provide liquidity on the free market, Centric rise has issued a freely traded token known as Centric Swap. Centric Swap became a low-volatility, zero-sum crypto trading currency that could be created or destroyed on demand in order to facilitate the liquidity of CNR. Users can therefore procure Centric Swap from licensed brokers, exchanges, or by the conversion of Centric Rise to Centric Swap via decentralized and immutable Centric convert protocol.

Centric Swap has been pegged to $1.00 worth of CNR upon the convert protocol however it is not backed by any sort of assets which set it apart from stable coins as it removes the counterparty risk as well as any potential regulatory issues that are faced by stable coins which are normally backed by government-issued fiat currencies.

Final Thoughts 

The vast expansion of the growth that crypto trading has experienced is great, for those who participate in trading,  in that it allows for an internationally recognized currency without the need to have to channel through various 3rd party banks.

However, the volatility of the currency makes it unstable and it has the potential to cause major issues within the global economic structure.

Whilst stablecoin works to help mitigate this instability, it is still dependent on factors such as the US dollar, precious metals such as platinum and gold, or short-term securities. 

Centric, however, is the first currency of its kind to combat the issue of crypto volatility without being dependent on the factors that stablecoin is. Whilst Centric’s nominal value is steady it will experience “effective” price changes due to Centric Swap.

In order to prevent market volatility, Centric has built-in both inflation and deflation. This allows for a safer way to invest in the crypto world without having to constantly worry about the extremities that currencies such as Bitcoin and Etherium face.