IMF cues could help the world align crypto rules

News: A recent blog published by the International Monetary Fund (IMF) has called for coordinated regulatory frameworks designed to mitigate crypto risks, on the lines of what India already suggested.

The blog post warns of the impact that unregulated proliferation of crypto tokens could have on financial stability, especially in emerging markets.

Key points of the blog post are discussed in this article.

What are the issues that need to be tackled by the regulators?

– Crypto valuation

– Investor protection

– Safety of crypto exchanges and wallets

– Worries of opacity and mendacity (fraud) on reserves held by some crypto issuers to back their stablecoins.

– Flight of capital induced by outward remittances

What is the way forward?

The blog recommends,

– Crypto assets be regulated separately from digital tokens that serve as a medium of exchange.

– Licensing of crypto-asset service providers involved in their storage, transfer, etc

– Systemized custody of assets

– Distinction based on function: Cryptos that are held as investments could be overseen by the country’s market regulator i.e. SEBI, and those used for payments by its monetary authority, i.e. the RBI.

– Synchronised global effort: As the internet is borderless, so a global effort is needed to keep cryptos under adequate watch. For efficacy, common principles of supervision need to be implemented.

Given the IMF’s pre-eminent role as a policy advisor and regulator of sorts for the global economy, it is best suited to take leadership of a coordinated global approach to crypto governance.

Source: This post is based on the article “IMF cues could help the world align crypto rules” published in Livemint on 16^th Dec 2021.