IMF Clamors For A Global Crypto Regulation

The International Monetary Fund (IMF) has raised alarms over potential financial stability risks posed by the new development in cryptocurrencies. It advised worldwide regulation to be “comprehensive, consistent, and coordinated.”

This was revealed in a blog post where the IMF’s top executives called for “comprehensive international standards.” According to them, this will mitigate the crypto market’s trading risk. Thus, the goods developed by blockchain firms will have immediate societal implications.

Licensing And Authorization A Requisite For Cryptocurrency Exchanges

Cryptocurrency service providers, such as exchanges, should be licensed or authorized, and a clear distinction between assets, such as products and services should be established. This communicates their investment potential. 

The IMF representatives further assert that regulators must monitor payment assets, clearly differentiating between their types – payment or investment. They claim that digital assets used for investment purposes should be monitored by what they refer to as “the central bank or the payments supervision body.”

IMF Proposes Standards And Procedures For Financial Markets Exposed to Cryptos

Finally, financial institutions exposed to cryptocurrency should be required to follow “clear requirements.” While the requirements in question have not been fully agreed upon, it is believed that it is a set of standards and procedures for managing digital assets in the new economy. In their view, such requirements include risk assessments, risk mitigation strategies, and a thorough investor profile.

The officials behind the post underlined concerns to emerging markets and developing economies, including what they called “crypto nation.” They argue that emerging markets are unsuitable for adopting volatile crypto goods because they need a market that could offer asset stability, capital asset coordination, and a safe exchange structure. These infrastructures, they believe, the traditional financial system can offer, which the crypto market cannot provide regardless of its massive market capitalization.

Overrated Cryptocurrency Market

Cryptocurrency’s $2.5 trillion market cap demonstrates the importance of developments like blockchain—and the officials believe that the industry is overrated.

Additionally, the IMF cited the crypto selloff that followed the Omicron COVID-19 variation disclosures, claiming that the crypto sector’s $2.5 trillion market worth may indicate an overestimation of the fragility and hype surrounding the crypto ecosystem.

The IMF emphasized the difficulties created by crypto’s “cross-sector and cross-border reach” and the disparate approaches to the asset class taken by different countries.

Over the last year, regulators worldwide have increased their emphasis on cryptocurrencies; last month, the US Federal Reserve, FDIC, and OCC released a joint statement outlining an ambitious crypto agenda that includes stablecoin issuance by banks. Soon after, the OCC sent a letter urging banks to demonstrate proper controls before engaging in cryptocurrency-related operations.

Monitoring Issues Due To Jurisdiction And Geographical Regulations 

In Europe, the FCA, the United Kingdom’s Financial Conduct Authority, invested $670,000 in staff training to identify illicit applications of cryptocurrency. Japan’s Financial Services Agency recently announced intentions to restrict stablecoin issuance to banks and wire transfer providers beginning in 2022.

Additionally, the officials noted that numerous cryptocurrency service providers operate out of jurisdictions that pose a likely threat to the safety of the West, making monitoring and regulation a real issue and worry.