Cryptos Muted As Monetary Policy Anxiety Lingers

Cryptocurrencies hovered close to the flatline early on Thursday amidst lingering monetary policy anxiety. Several Fed officials are expected to speak later in the day. Inflation updates are due from China on Friday and from the U.S. on Wednesday.

Strong Services Sector PMI readings from the U.S. released on Wednesday had heightened expectations of the Fed raising rates further. Meanwhile, data released just a while ago showed the number of Americans filing for unemployment benefits dropped to 216 thousand in the week ended September 2, versus the previous reading of 229 thousand and well below market expectations of 234 thousand.

Overall crypto market is currently close to $1.04 trillion, steady at the levels a day earlier.

Bitcoin dropped 0.17 percent overnight to trade at $25,647.75.

Ethereum slipped 0.35 percent to trade at $1,625.26.

BNB (BNB), XRP (XRP) and Cardano (ADA) have all declined less than 1 percent.

Dogecoin (DOGE) and Solana (SOL) declined more than 1 percent in the past 24 hours.
TRON (TRX) however gained close to 1 percent.

Meanwhile, the Financial Stability Board and the International Monetary Fund have published an IMF-FSB Synthesis Paper titled Policies for Crypto-Assets. The collective recommendations contained in the document provide comprehensive guidance to help authorities address the macroeconomic and financial stability risks posed by crypto-asset activities and markets, including those associated with stablecoins and those conducted through so-called decentralized finance or DeFi. The paper’s key objective is to synthesize the work of the IMF and the FSB in the area of crypto assets and does not establish new policies, recommendations, or expectations for relevant member authorities.

The document discusses the key risks to macroeconomic stability, financial stability, as well as other risks like legal, financial integrity and market integrity related risks. The report notes that transmission of monetary policy would weaken if firms and households prefer to save and invest in crypto assets that are not pegged to the domestic fiat currency or to use them as payment instruments or medium of account. Crypto assets could have significant implications for monetary stability, especially if they are granted official currency or legal tender status as central banks lack the ability to adjust interest rates on a foreign currency, the report notes. The paper also warns that if crypto-assets are granted legal tender status or official currency status, government revenues could be exposed to exchange-rate risk. If used in cross border transactions, crypto assets could erode the effectiveness of capital flow management measures.

The document also presents policy responses to these risks in the areas of macro-financial policies, financial stability regulation as well as other regulatory measures. The paper also provides an implementation roadmap.

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