“Cryptoization” is a word used by the International Monetary Fund and the Financial Stability Board to describe a theoretical process in which citizens of some country begin to prefer cryptocurrency over the sovereign’s money.
Driving the news: The word appears in a new report, jointly issued by the two international bodies, aimed at synthesizing global regulation of the crypto industry.
What they’re saying: “The risk of currency substitution (‘cryptoization’) is particularly pertinent for countries with unstable currencies and weak monetary frameworks,” the authors write.
Details: It’s not hard to read the above statement as the IMF and FSB largely making the same sort of case that global bodies have been making all along: Get your financial house in order, and everything else will take care of itself.
On the other hand: Bans aren’t worth the trouble, the report argues. In fact, they probably won’t work, but they will waste energy and perhaps export trouble to neighbors.
The report took particular aim at stablecoins, reiterating the push for countries to get aligned with each other in terms of how they handle stablecoins and limit the potential for those instruments to create shocks to the global system.
What we’re watching: The report hinted at research into some of the more sophisticated bits of the industry. For example, it compares decentralized finance with traditional finance, and it addresses maximal extractable value (MEV).
The intrigue: Currently, India holds the presidency of the Group of 20 major economies and hosted a meeting this weekend. But the country has an ambivalent relationship with cryptocurrencies, despite the popularity of coins and tokens with Indian citizens.
Bottom line: “Rapid cryptoization can have an impact on the monetary independence and financial stability of economies,” the report warns.