The International Monetary Fund last week warned that crypto could create a new financial system, to which the crypto industry responds: Exactly.

“Crypto asset technologies, if not well regulated and supervised, could create de facto a new and alternative financial system,” the IMF wrote in a Sept. 29 working paper.

The study, titled “Assessing Macrofinancial Risks from Crypto Assets,” discusses the potential systemic risks associated with the increasing prominence of cryptocurrencies and offers a framework for understanding and tracking these risks.

Risk Assessment Matrix

The paper introduces a country-level Crypto-Risk Assessment Matrix (C-RAM) to summarize key vulnerabilities, indicators, potential triggers, and policy responses relevant to the crypto sector.

This matrix aims to help policymakers and experts better identify and navigate the risks presented by cryptocurrencies and create relevant strategies to contain and manage those risks.

Fraud and Cybersecurity

Major areas of concern include structural vulnerabilities in the crypto ecosystem, contagion risks between traditional finance and crypto, operational risks, regulatory arbitrage, limited transparency, and data availability.

The inherent susceptibility of the crypto industry to fraud, cybersecurity threats, and technology risks exposes it to various external threats, the IMF said.

Liquidity risks, market integrity risks, and legal and consumer protection risks also pose significant challenges for the crypto industry, the IMF said.

Secured Ledger

Participants relying on a secured, transparent record for clearing, and settlement of financial transactions provided by distributed ledger technology mitigates some of the risks observed, but introduces regulatory challenges, the IMF said.

What the IMF views as potential risks to asses, is what the cryptocurrency advocates argue will make for a more efficient and accessible financial system.