The International Monetary Fund (IMF), an organization with 190 member countries that promotes economic policies that support financial stability and monetary cooperation, said that its executive board recently had the opportunity to discuss the paper "Elements of Effective Policies for Crypto Assets," which addresses the risks and benefits of crypto assets. The paper outlines nine policy actions that the IMF recommends to member countries that are implementing a regulatory framework for the crypto space. IMF Managing Director Kristalina Georgieva has said that if countries are unable to implement strict regulations, they should consider banning crypto due to financial stability risks, but U.S. Treasury Secretary Janet Yellen said at the Feb. 25 G20 meeting that the U.S. is not going to ban crypto.
"Executive Directors welcomed the opportunity to discuss the board paper on elements of effective policies for crypto assets. They noted the timeliness and importance of the paper, as well as its relevance to the IMF’s wide and diverse membership, and generally underscored the need for a comprehensive framework," the IMF wrote. "They considered that the growing adoption of crypto assets in some countries, the extra-territorial nature of crypto assets and its providers, as well as the increasing interlinkages with the financial system, motivate the need for a comprehensive, consistent, and coordinated response."
The IMF's board paper includes nine recommended policy actions for the regulation of crypto assets. The first recommendation is to refrain from giving crypto assets status as official currency or legal tender, which the paper says will "safeguard monetary sovereignty and stability." The second recommendation is to protect against and implement management measures for volatility in capital flow. The third recommendation is to ensure that financial risks are disclosed and to implement clear tax rules for crypto assets. The fourth recommendation is to clarify the legality of crypto assets and "address legal risks." The fifth recommendation is that countries should establish and enforce certain requirements regarding the conduct and oversight of all crypto market actors.
The sixth recommendation in the board paper is for countries to "establish a joint monitoring framework across different domestic agencies and authorities." The IMF's seventh recommendation is for the international community to set up a global, collaborative arrangement for crypto market regulation and supervision. The eighth recommendation is to monitor any impact crypto assets are having on global financial systems. The final recommendation is to "strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance." "By adopting the framework, policy makers can better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation associated with it."
The paper said that broader crypto adoption could "exacerbate fiscal risks," so the IMF directors have agreed that the appropriate regulatory authorities must develop comprehensive guidelines. The paper called for coordination between domestic and international authorities to ensure that implementation is consistent and to minimize the chances of arbitrage.
IMF Managing Director Kristalina Georgieva said that if countries are unable to implement regulation, they should consider banning crypto outright, CoinTelegraph reported. “There has to be very strong push for regulation... if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk," Georgieva said.
At a G20 meeting that took place in India on Feb. 25, U.S. Treasury Secretary Janet Yellen said the U.S. is not pursuing an "outright banning of crypto activities.“ Yellen did say that it is “critical to put in place a strong regulatory framework.“ During the G20 meeting, India's Finance Minister Nirmala Sitharaman echoed the IMF's call for a coordinated, global approach to crypto regulation.