The Executive Board of the International Monetary Fund (IMF) has provided guidance to help member countries develop effective cryptography policies. The Executive Board emphasized the need to develop comprehensive crypto regulations to “better mitigate the risks posed by crypto assets while leveraging the potential benefits of technological innovation.”
IMF Executive Board Provides Guidance on Crypto Regulation
On April 14, the International Monetary Fund (IMF) announced the results of discussions conducted by Executive Board members on a paper entitled “Elements of Effective Policies for Crypto Assets.”
Noting that the paper lays out a regulatory framework that will “help member countries develop a comprehensive, consistent, and coordinated policy response” to crypto assets, the IMF emphasized.
By adopting this framework, policymakers can better mitigate the risks posed by crypto assets, while at the same time capitalizing on the potential benefits of innovation associated with crypto assets.
The first element of the framework, as described by the IMF, is to “protect monetary sovereignty and stability by strengthening the monetary policy framework and not giving crypto assets official or legal tender status.”
Other elements include protecting against “excessive capital flow volatility,” adopting “clear tax treatment of crypto assets,” and enforcing “prudential, conduct and monitoring requirements for all crypto market participants.” The framework also establishes a “joint oversight framework across different national agencies and authorities” and “international cooperation arrangements to strengthen oversight and enforcement of crypto asset regulation,” the IMF elaborates.
The Executive Board “generally observed that while the potential benefits envisaged from crypto assets have not yet been realized, significant risks have emerged,” the IMF continued, adding.
The Directors generally agreed that crypto assets should not be given official or legal tender status in order to protect monetary sovereignty and stability.
In addition, the Directors warned that “crypto assets affect policies that are at the core of the IMF’s mandate,” in particular their widespread use “could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks.”
The IMF further informed that Executive Board members “broadly agreed on the need to develop and apply comprehensive regulations for crypto assets, including prudential and behavioral regulations and effective implementation of FATF [Financial Action Task Force] standards.” The Directors also said that the IMF should “work closely to support the regulatory work under the leadership and guidance of the standard-setting bodies.”
While several Directors did not believe that an outright ban on cryptocurrencies should be ruled out, the IMF noted that.
Directors agreed that a strict ban is not the first option, and that targeted restrictions can be applied depending on domestic policy objectives and authorities facing capacity constraints.
Emphasizing the importance of promoting the principle of “same activities, same risks, same regulations,” the Directors stressed that “strong coordination among authorities at national and international levels is essential for consistent implementation and to avoid regulatory arbitrage. They concluded that the IMF “can serve as a thought leader in further analytical work on rapidly evolving developments in crypto assets.”
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