A blanket ban on crypto hard to implement: Report

Source: The post is based on the article “A blanket ban on crypto hard to implement: Report” published in Livemint on 8th September 2023

What is the News?

The International Monetary Fund(IMF) and the Financial Stability Board (FSB) have released advanced policy and regulatory recommendations to identify and respond to macroeconomic and financial stability risks associated with crypto assets. 

What are the risks presented by crypto-assets?

The report noted that crypto-assets pose risks to macroeconomic and financial stability as well as risks involving financial integrity, consumer and investor protection and market integrity. 

In some instances, these risks are exacerbated by noncompliance with existing laws.

Can we completely ban crypto assets?

Source: Business Standard

Blanket bans that make all crypto-asset activities — trading and mining — illegal can be costly and technically demanding to enforce.

This is because blanket bans tend to increase the incentives for circumvention due to the inherent borderless nature of crypto-assets, resulting in potentially heightened financial integrity risks and creating inefficiencies. 

Moreover, ban in one jurisdiction could also lead to activity migrating to other jurisdictions, creating spillover risks. 

Hence, instead of banning crypto assets we can take other measures such as:

– Comprehensive policy and regulatory response for crypto-assets to address the risks of crypto-assets to macroeconomic and financial stability. 

– Targeted restrictions such as crypto taxation to address risks.

– Monitor crypto’s impact on the International Monetary System.

– To curb misuse of these assets, countries should implement the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing standards that apply to virtual assets and virtual asset service providers.