The IMF directors say crypto regulation has to be on a global level because the fast growth of the sector is intensifying the need for global regulation. The regulation has to be comprehensive and consistent and not on a national level so let’s find out in today’s cryptocurrency news.
The IMF directors issued a paper where it says that the crypto regulation has to be global and coordinated by the world’s regulators. According to the paper:
“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.”
The analysis was authored by Tobias Adrian as the Financial counselor and Director of the IMF Monetary and Capital Markets Department, Dong He who is the Deputy Director of Monetary and also Capital Markets Department of the IMF, and finally the Deputy Director of the MCM department Aditya Narain. The there authors argued that the uncoordinated regulatory measures could even destabilize the capital flow worldwide:
“While the nearly [USD] 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 [of the COVID-19 virus] included a significant crypto selloff.”
The authors justified the need for crypto regulation worldwide with the observation that cryptocurrencies’ cross-sector and cross-border remit limits the effectiveness of the national approach. They also believe that supervision and enforcement are much more difficult because of the many crypto service providers that are operating across borders. The global regulatory framework could ensure a level playing field along with the activity and risk spectrum including crypto asset service providers that perform critical functions and the need to be licensed or authorized.
Another one of the key elements is the requirement that has to be tailored to the main use case of the crypto assets and stablecoins which means that the services and products have to have requirements that are similar to the ones of securities brokers that are enforced by securities regulators. Authorities should also define all of the requirements in a clear manner on regulated financial institutions in regards to the exposure and interaction with crypto. The paper said that there’s a strong need for cross border collaboration and cooperation adding that it is a very hard task to set up a consistent and coordinated regulatory approach for crypto:
“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.”