IMF: Cryptocurrency regulations need to be comprehensive, consistent and well coordinated

The International Monetary Fund (IMF), the financial institution focused on maintaining global financial stability, recently announced outline some suggestions on how to effectively regulate the cryptocurrency sector.

The IMF recognizes that cryptocurrencies are rapidly revolutionizing the entire global financial system. However, policy makers still struggle to monitor the risks posed by the market.

Regulators need to act quickly

The IMF indicated that the rapid growth of the crypto space has linked it to economies that are regulated but remain unregulated. At the same time, the IMF also notes that these linkages pose serious risks unless global financial regulators act quickly to mitigate threats and harness the revolutionary power of electronic money.

“Policy makers struggle to monitor crypto-sector risks, many of which are unregulated. In fact, we believe that these risks to financial stability could soon become systemically important in some countries. “

The IMF has called for a “comprehensive, consistent and coordinated” approach to regulating the crypto space, stressing that uncoordinated regulatory measures can “facilitate capital flows” that can be potentially destabilizing as most crypto firms operate across borders.

IMF proposal

In order to effectively regulate cryptocurrencies on a global level, the IMF has formulated three core requirements for the regulatory authorities.

• First, cryptocurrency service providers that provide a number of critical functions, including the transfer, storage, settlement, and custody of digital assets, must be licensed or authorized. The admission criteria should also be clearly identified with a specific assignment to the respective departments.
• Second, the requirements must be relevant to the main use cases of the cryptocurrency. For example, investment products must have similar requirements as stockbrokers and be regulated by securities regulators. Payment products must have the same requirements as banks and must be regulated by the central bank.
• Third, governments of different countries should require regulated financial institutions to provide clear and comprehensive information about their involvement and involvement in cryptocurrencies.

The IMF also warned of the increased use of cryptocurrencies in most of the developing world.

“Some emerging and developing countries are facing more urgent and more immediate risks of replacing currencies with crypto assets, so-called cryptocurrencies. The measures to control capital flows need to be refined in view of the cryptocurrency. “

In early July, shortly after El Salvador accepted Bitcoin as legal tender, the IMF warned that using cryptocurrencies as local currency was risky.

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