Crypto Regulations Should Be Comprehensive, Says IMF
The financial institution also highlighted rapid global crypto adoption.
International Monetary Fund (IMF) recently published a post about crypto-assets and their regulations. The fund asked for a comprehensive global approach to regulate digital assets.
The crypto market witnessed significant growth in the last 11 months. The market capitalization of digital assets jumped by more than 200% this year and touched a record high of $3 trillion in November 2021. With rising adoption, the use of crypto assets in illegal financial activities has also increased. IMF highlighted some key issues related to Bitcoin and other digital assets.
According to the fund, several digital currencies are overvalued, and the protection of crypto investors is still a major problem due to the lack of clear regulations. IMF believes that an uncoordinated global approach to cryptocurrency regulations will destabilize the financial system.
“In emerging markets and developing economies, the advent of cryptocurrencies can accelerate what we have called ”cryptoization“—when these assets replace domestic currency and circumvent exchange restrictions and capital account management measures. Such risks underscore why we now need comprehensive international standards that more fully address risks to the financial system from crypto assets, their associated ecosystem, and their related transactions while allowing for an enabling environment for useful crypto asset products and applications,” the post noted.
During a recent event hosted by Bocconi University in Italy, Kristalina Georgieva, International Monetary Fund (IMF) Managing Director, stated that it is difficult to treat Bitcoin and other cryptocurrencies as money.
Crypto Regulatory Framework
IMF outlined the urgent need for international collaborations to solve the technical, supervisory, and regulatory challenges related to cryptocurrencies. The financial institution believes that digital currencies are changing the international monetary and financial system.
“The IMF has developed a strategy in order to continue to deliver on its mandate in the digital age. The Fund will work closely with the Financial Stability Board and other members of the international regulatory community to develop an effective regulatory approach to crypto-assets,” IMF added in the post.
