Crypto Regulation – IMF warns of global financial instability due to cryptocurrencies


According to the International Monetary Fund, the crypto space poses one thing in particular: risks to the traditional financial sector. In the latest blog post, the IMF calls for extensive regulations for crypto assets.

For the International Monetary Fund (IMF), it may have been too fast on crypto. El Salvador not only implemented Bitcoin (BTC) as legal tender, but likewise announced aspirations for a proper Bitcoin city. This is to be located at the foot of a volcano, powered by the nearby geothermal power plant for mining new coins.

However, the IMF sees this as primarily a threat to international finance and warns of the volatility of crypto assets. In a Dec. 9 blog post, the organization calls for “comprehensive, consistent and coordinated” global crypto regulation. In doing so, the IMF states that the crypto market’s total market capitalization of $2.5 trillion may reflect not only the economic value of blockchain technology, but also the “inflated valuation” of digital assets.

But it is not just the valuation of digital assets that is problematic, according to the IMF. In the crypto ecosystem, the “identification, monitoring, and management of risks would also challenge regulators and firms,” the IMF said. Accordingly, the IMF is calling for “comprehensive international standards that address risks to the financial system … more comprehensively,” the organization writes. However, it said there should be “a concurrent enabling environment for useful crypto-asset products and applications.”

Most importantly, the applicability of cryptocurrencies across sectors and country borders would limit the “effectiveness of national approaches” in each country.

In terms of regulation, the IMF calls for three main things. Crypto asset providers should be licensed or authorized, and authorities should issue clear requirements for regulated financial institutions regarding their crypto engagement. In addition, the requirements for the respective assets should be based on the main use cases. This means that regulations of assets that are to be used for payments should follow regulations in the field of bank deposits, for example.

source: DeepL

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