The International Monetary Fund (IMF) head Kristalina Georgieva during the World Economic Forum’s annual meeting on Tuesday advised investors not to abandon the crypto market despite Terra’s crash.
In the meeting, she also said the collapse of Terra’s algorithmic stablecoin UST should not make people ditch cryptocurrencies as not all digital currencies are the same.
Kristalina Georgieva believes the crypto market is important as it offers faster service at lower costs and is more inclusive. She went on to say, every investment comes with some level of associated risks and so do cryptocurrencies but with proper research.
Therefore, stablecoins backed by cash and other assets are different from algorithmic stablecoins. Stablecoins are supposed to maintain a 1:1 peg with reserve assets like the US dollar.
The collapse of algorithmic stablecoin TerraUSD or UST caused massive liquidation across the crypto market. This should serve as a reminder to investors to be aware of the potential risks with assets that are not well-backed. Hence, investors should continue to invest in cryptocurrencies.
Georgieva stated “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.” She said further, “The less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face.”
She also urges regulators across the world to protect investors through crypto education and regulation. Moreover, she warned against volatile crypto products with currencies. Anything not backed by a sovereign guarantee can be an asset class, but not a currency.
Amid the ongoing discussion, the spokesperson for the IMF, Gerry Rice also came to the rescue of crypto that the IMF supported El Salvador in the compilation of statistics about the use of Bitcoin (BTC) to boost the country’s anti-money laundering efforts.
