IMF Board Provides Guidance To Develop Effective Crypto Policies
The outcome of a discussion held by the International Monetary Fund (IMF) on a paper definitively titled “Elements of Effective Policies for Crypto Assets” was announced by its executive directors on Thursday. The International Monetary Fund emphasised that “noting that the paper serves to create a definitive regulatory framework that can assist members to develop a comprehensive and coherent and a coordinated policy response”. He further added that by adopting this framework, policy makers can better mitigate the risks posed by crypto-currency assets as well as potentially benefit from the associated technological innovation. The first element of the framework, as stated by the International Monetary Fund, is to “strengthen the monetary policy framework to protect monetary sovereignty and stability and not officially grant the tender status of legal currency to a crypto currency asset”. Also among other elements are “very high capital flow volatility” and the adoption of “clearer tax treatment of crypto assets” and “implementing prudential and conduct and oversight requirements for all types of cryptocurrency market actors.”
The International Monetary Fund elaborated that the framework also establishes “a supervisory framework jointly established by various domestic agencies and authorities” and “a system of international cooperation to enhance regulation supervision and enforcement of crypto assets”. The International Monetary Fund further continues that the Executive Board of Directors “generally observed that all of the risks to crypto assets remain to be materialised but that significant risks have emerged.” The directors generally agree that crypto assets should not be granted official currency or legal status in order to protect monetary sovereignty and stability.
Furthermore, “Crypto assets are implicit in policies that are at the core of the Fund’s mandate and in particular their widespread adoption and are proposed to reduce monetary effectiveness altogether, bypassing capital flow management measures.” and increase the risk to the State exchequer”. It was further reported by the IMF that its Executive Board of Directors are in particular agreement on the need to promulgate and enforce regulations in a comprehensive manner, including prudential, prudential and conduct regulation for crypto assets, and the FATF [Financial Action task force] standards and in addition the directors also stated that the International Monetary Fund should “work together to support regulatory work under the leadership and guidance of the standard-setting bodies.” Besides some Directors thought that outright gifting currency ban should not be ruled out, the IMF pointed out that it was agreed by the Directors that a strict ban is not the first best option but that domestic policies serve the purpose and where the authorities Is facing capacity constraints can impose restrictions there. Certainly the directors stressed that “to promote the principle of common activity and common risk and common regulation” and a strong dialogue between authorities at both the domestic and international level and continued implementation and avoidance of regulatory arbitrage is important. He concluded that the International Monetary Fund could serve as a thought leader in further analytical work on the rapid developments in crypto assets.”