The International Monetary Fund (IMF) has outlined some recommendations of how cryptocurrency should be regulated, noting that there is an urgent need for cross-border collaboration and cooperation on cryptocurrency regulation.
IMF Provides Recommendations on Crypto Regulation
The International Monetary Fund published a blog post on cryptocurrency regulation Thursday. The post titled â€œGlobal Crypto Regulation Should be Comprehensive, Consistent, and Coordinatedâ€ is authored by Tobias Adrian, Dong He, and Aditya Narain from the IMFâ€™s Monetary and Capital Markets Department.
Noting that â€œCrypto assets and associated products and services have grown rapidly in recent yearsâ€ and their â€œinterlinkages with the regulated financial system are rising,â€ the authors acknowledged:
Crypto assets are potentially changing the international monetary and financial system in profound ways.
â€œPolicymakers struggle to monitor risks from this evolving sector, in which many activities are unregulated,â€ they explained, adding: â€œIn fact, we think these financial stability risks could soon become systemic in some countries.â€
IMF Suggests How Crypto Should Be Regulated
The IMF post then discusses how cryptocurrency should be regulated. â€œThe global regulatory framework should provide a level playing field along the activity and risk spectrum,â€ the authors asserted and proceeded to list three elements that should be included.
Firstly, crypto service providers â€” including those offering storage, transfer, settlement, and custody of reserves and assets â€” â€œshould be licensed or authorized,â€ the authors wrote. â€œLicensing and authorization criteria should be clearly articulated, the responsible authorities clearly designated, and coordination mechanisms among them well defined.â€
Secondly, â€œRequirements should be tailored to the main use cases of crypto assets and stablecoins,â€ they added, noting that regulators â€œneed to coordinate to address the various risks arising from different and changing uses,â€ including central banks and securities watchdogs.
Lastly, the IMF post notes that â€œAuthorities should provide clear requirements on regulated financial institutions concerning their exposure to and engagement with crypto.â€
The authors further warned that â€œIn emerging markets and developing economies, the advent of crypto can accelerate what we have called â€˜cryptoizationâ€˜â€”when these assets replace domestic currency, and circumvent exchange restrictions and capital account management measures.â€ They concluded:
There is an urgent need for cross-border collaboration and cooperation to address the technological, legal, regulatory, and supervisory challenges.
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