IMF and FSB Advocate Targeted Regulation Over Cryptocurrency Bans
Crypto News – The International Monetary Fund (IMF) and the Financial Stability Board (FSB) have issued a joint report cautioning against imposing blanket bans on cryptocurrency assets. Instead, they advocate for targeted regulatory measures to address the inherent risks associated with the cryptocurrency sector. The report also underscores the importance of adopting sound monetary policies in preparation for upcoming G20 meetings.
One of the key concerns highlighted in the joint report is the potential impact of cryptocurrencies on a nation’s monetary policies. The report argues that an outright ban on cryptocurrencies may not effectively address these challenges. Instead, it suggests a regulatory approach that involves licensing cryptocurrency service providers and implementing anti-money laundering and counter-terrorist financing (AML/CFT) standards established by the Financial Action Task Force (FATF) within the cryptocurrency industry.
The agencies recommend a targeted approach due to the borderless nature of cryptocurrencies. They advocate for the creation of a comprehensive framework that can oversee various aspects of the cryptocurrency sector, including markets, crypto-assets, stablecoins, and decentralized finance (DeFi).
The report emphasizes that to safeguard monetary stability, cryptocurrencies should not be granted official currency or legal tender status, a recommendation reiterated by the IMF since El Salvador granted legal tender status to Bitcoin. Additionally, the report advises central banks against holding cryptocurrency assets in their official reserve holdings and calls on governments to minimize fiscal and operational risks associated with cryptocurrencies. It also recommends clear and unambiguous tax treatment for this asset class.
India, which currently holds the presidency for the G20 Summit, is seeking consensus on cryptocurrency recommendations outlined in the policy paper. Rajagopal Menon, Vice President of WazirX, supports the IMF and FSB synthesis paper and emphasizes its importance in shaping the regulatory framework. Menon believes that adhering to the “same activity, same risk, same regulation” principle based on international standards can foster innovation and create a regulatory environment that safeguards investors while promoting financial innovation.
Indian Finance Minister Nirmala Sitharaman has emphasized the ongoing development of a global framework for regulating cryptocurrency assets, highlighting the need for international cooperation in this regard during India’s G20 presidency.
The G20 meeting is expected to endorse approximately ten significant initiatives, including a financial inclusion action plan for 2024-26 based on the Indian model of digital public infrastructure (DPI) and a globally robust framework for regulating cryptocurrency assets to mitigate risks.