IMF leans towards crypto regulation over just outlawing it
Kristalina Georgieva, managing director of the International Monetary Fund (IMF), stated that the monetary body prefers regulating crypto assets over a complete prohibition at the recent G20 finance ministers’ meeting in Bengaluru, India. The IMF’s viewpoint is consistent with recent research suggesting universal digital asset regulatory rules.
The top priority is to regulate digital assets
According to Georgieva, the IMF’s main objective is to regulate the digital currency world. She stated that fully backed stablecoins create a “fairly good environment for the economy,” but unbacked crypto assets are speculative, high risk, and not actual currency. The goal of the IMF is to distinguish between state-backed digital currencies produced by central banks and openly traded crypto assets, such as stablecoins.
Per Georgieva, digital assets have two components: technology and policy, and they need room to develop. Policies are being created to protect user data, safeguard consumers from dangers, and ensure transaction transparency.
Georgieva also noted that the IMF favored regulation over a ban and cautioned that if cryptos represent a greater risk to financial stability, a ban “should not be taken off the table.” To be released in the second half of the year, regulatory framework guidelines are being developed jointly by the IMF, the Financial Stability Board, and the Bank for International Settlements (BIS).
IMF’s nine-point action plan
The first recommendation of the International Monetary Fund’s nine-point action plan is to refrain from making cryptos like bitcoin (BTC) legal cash. The strategy outlines how nations should manage crypto assets.
The document “Elements of Effective Policies for Crypto Assets,” which “advice to IMF member countries on important aspects of an effective policy response to crypto assets,” was examined by the executive board of the world’s final resort lender.
As several crypto exchanges and assets collapsed over the past couple of years, the fund stated that such activities have become a priority for authorities and that continuing with nothing would now be “untenable.”
To “safeguard monetary sovereignty and stability by improving monetary policy frameworks and do not issue crypto assets official currency or legal tender status” was the main recommendation.
The IMF criticized El Salvador in 2021 for becoming the first nation in the world to accept bitcoin as legal cash; the Central African Republic followed El Salvador’s lead afterward.
Other suggestions included preventing excessive capital flows, adopting clear tax regulations and laws about crypto assets, and creating and enforcing oversight standards for all participants in the crypto market.
The US treasury secretary backs a strong regulatory framework
US Treasury Secretary Janet Yellen highlighted the significance of building a strong regulatory framework for crypto assets during the G20 summit. She said, however, that the US had not put forth any restrictions on these assets.
“We have not advocated the outright prohibition of cryptocurrency operations, but it is essential to establish a robust regulatory framework. We collaborate with other governments.”
US treaury Secretary Janet Yellen
India seeks to create a crypto law
The Indian government has considered writing a law to control or outlaw digital currencies for some years. India has requested assistance from the IMF and Financial Stability Board (FSB) in creating a technical report on crypto assets during the current G20 Presidency. The Reserve Bank of India still believes cryptos should be outlawed since they are akin to Ponzi schemes, despite India’s efforts to regulate them.
The best methods for governing the crypto market include regulation, predictability, and consumer protection. The United States and the IMF do not favor the nuclear option of an outright prohibition, but it is still an option. It is anticipated that a uniform and comprehensive approach to regulating crypto assets is anticipated to emerge as the IMF, FSB, and BIS work on regulatory framework principles.
This article was written with the additional reporting from Julius Mutunkei.
