The International Monetary Fund (IMF) has raised concerns about the widespread proliferation of crypto assets and the potential impact on banks.

In a report titled “Macrofinancial Implications of Crypto Assets” presented to the Group of 20 (G-20) nations in February, the IMF warned that banks could lose deposits and curtail lending if crypto assets continue to grow.

The report, which was made public on Monday, highlights the risks associated with the effectiveness of monetary policy, exchange rate management, and capital flow management measures, as well as to fiscal sustainability.

It also highlights the potential need for changes to central bank reserve holdings and the global financial safety net, which could yield potential instability.

The report was produced after “very helpful discussions with the Indian Ministry of Finance, as well as international focus group participants” and led to the G-20 deciding on framing global crypto rules through a yet-to-be-framed synthesis paper jointly produced by the IMF and the Financial Stability Board (FSB).

Despite the risks, the report acknowledges that crypto assets have developed technologies that the public sector can leverage in pursuit of its own policy objectives.

The report emphasizes the need for filling data gaps to facilitate policymaking and acknowledges that the significance and relevance of specific risks differ by country circumstances.