GLOBAL CRYPTO REGULATION SHOULD BE COMPREHENSIVE, CONSISTENT, AND COORDINATED, IMF SAYS

Fri 10 December 2021:

The International Monetary Fund (IMF) said Thursday that global regulation of cryptocurrencies should be comprehensive, consistent, and coordinated.

Crypto assets and associated products and services have grown rapidly in recent years. Furthermore, interlinkages with the regulated financial system are rising. Policymakers struggle to monitor risks from this evolving sector, in which many activities are unregulated. In fact, we think these financial stability risks could soon become systemic in some countries.

While the nearly $2.5 trillion market capitalization indicates significant economic value of the underlying technological innovations such as the blockchain, it might also reflect froth in an environment of stretched valuations. Indeed, early reactions to the Omicron variant included a significant crypto selloff.

“Policymakers struggle to monitor risks from this evolving sector, in which many activities are unregulated. In fact, we think these financial stability risks could soon become systemic in some countries,” it said. “Uncoordinated regulatory measures may facilitate potentially destabilizing capital flows.”

Crypto’s cross-sector and cross-border remit limits the effectiveness of national approaches. Countries are taking very different strategies, and existing laws and regulations may not allow for national approaches that comprehensively cover all elements of these assets. Importantly, many crypto service providers operate across borders, making the task for supervision and enforcement more difficult. Uncoordinated regulatory measures may facilitate potentially destabilizing capital flows.

The IMF listed challenges in the crypto market, including identification, monitoring, operational and financial integrity risks, and inadequate reserves and inaccurate disclosure for some stable coins.

According to IMF blog ,There is an urgent need for cross-border collaboration and cooperation to address the technological, legal, regulatory, and supervisory challenges. Setting up a comprehensive, consistent, and coordinated regulatory approach to crypto is a daunting task. But if we start now, we can achieve the policy goal of maintaining financial stability while benefiting from the benefits that the underlying technological innovations bring.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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