The International Monetary Fund (IMF) has published a working paper proposing a Crypto-Risk Assessment Matrix (C-RAM) to identify vulnerabilities and potential policy responses in the crypto sector. The matrix is designed to help countries spot indicators and triggers of potential risks, as well as summarize regulators’ potential responses to those risks. It consists of a three-step approach: assessing crypto’s macro-criticality, examining indicators similar to those used in the traditional financial sector, and considering global macro-financial risks. The authors of the paper applied C-RAM to El Salvador as an example and identified market, liquidity, and regulatory risks associated with the country’s adoption of Bitcoin as legal tender.
The IMF has consistently discouraged El Salvador from adopting Bitcoin due to the “large risks” it carries in terms of financial stability, integrity, and consumer protection. This latest working paper is part of regulators’ efforts to keep up with the rapid development of the crypto industry and establish appropriate responses to mitigate potential risks. In collaboration with the Financial Stability Board (FSB), the IMF has also released a joint paper containing policy recommendations for addressing various risks associated with crypto activities.
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