The Board of Directors of the International Monetary Fund (IMF) has provided guidance to member countries on how to develop effective crypto policies. The board stressed the need to develop comprehensive crypto regulations to “better mitigate the risks posed by crypto assets while reaping the potential benefits of technological innovation.”
IMF Executive Board provides guidance on crypto regulation
The International Monetary Fund (IMF) on Thursday announced the outcome of a discussion led by its Executive Directors on a paper titled “Elements of Effective Policies for Crypto Assets.”
Noting that the paper sets out a regulatory framework that can “help members develop a comprehensive, consistent, and coordinated policy response” to cryptoassets, the IMF stressed:
By adopting the framework, policymakers can better mitigate the risks posed by crypto assets while reaping the potential benefits of associated technological innovation.
The first element of the framework outlined by the IMF is to “maintain monetary sovereignty and stability by strengthening the monetary policy framework and not granting crypto assets official currency or legal tender status.”
Other elements include protections against “excessive capital flow volatility,” adoption of a “clear tax treatment of crypto assets,” and enforcement of “prudential, conduct, and oversight requirements for all crypto market players.” The framework also creates “a common oversight framework for various domestic agencies and authorities” and “international collaborative arrangements to enhance the oversight and enforcement of crypto-asset regulations,” the IMF detailed.
The Directors of the Executive Board “generally observed that while the purported potential benefits of crypto assets have not yet materialized, significant risks have emerged,” the IMF continued, adding:
Directors generally agreed that crypto assets should not be granted official currency or legal tender status in order to preserve monetary sovereignty and stability.
In addition, “cryptoassets have policy implications that lie at the heart of the fund’s mandate,” particularly their widespread adoption “could undermine the effectiveness of monetary policy, circumvent cash flow management measures, and exacerbate fiscal risks,” warned the directors.
The IMF went on to say that its Executive Directors “broadly agreed on the need to develop and apply comprehensive rules, including prudential and conduct rules for crypto assets and effective implementation of the FATF [Financial Action Task Force] Standards.” Directors also stated that the IMF “should work closely together to support regulatory work under the direction and guidance of standard-setting bodies.”
While some Directors felt that outright bans on cryptocurrencies should not be ruled out, the IMF pointed out:
Directors agreed that strict bans are not the best option, but that targeted restrictions could apply, depending on domestic policy goals and where authorities face capacity constraints.
Directors stressed the importance of promoting the principle of “equal activity, equal risk, equal regulation” and emphasized that “strong coordination between authorities at both the national and international levels is critical to consistent implementation and avoidance of regulatory arbitrage. They concluded that the IMF “could serve as thought-leadership in further analytical work on rapidly evolving developments in crypto-assets.”
What do you think of the IMF Board’s guidance on developing crypto policies? Let us know in the comment section below.
Kevin Helms
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