IMF Released a Board Paper With a Framework for Crypto Assets

According to a recent press release, the Executive Board of the International Monetary Fund (IMF) discussed a board paper on February 8th, 2023. The board paper on Elements of Effective Policies for Crypto Assets provides guidance to IMF member countries on major elements of an appropriate policy response to crypto assets.

Effective policies for crypto assets

The objectives of the paper are in line with the IMF’s mandate to support economic and financial stability across its membership. The paper noted the questions raised by IMF member countries on benefits along with risks of crypto assets. The paper also mentioned how to structure appropriate policy responses.

The board paper operationalizes “the principles outlined in the Bali Fintech Agenda (IMF and World Bank 2018) and includes macrofinancial considerations such as implications for monetary and fiscal policies. The proposed principles are fully aligned with the relevant standards of the Financial Stability Board and other standard setting bodies.”

The collapse of many exchanges along with other actors within the crypto industry, and also the collapse of certain crypto assets has alarmed authorities. Thus, effective policies for crypto assets have become a key policy priority. Also, doing nothing can be untenable as crypto assets continue to evolve despite current market slowdown.

A framework of nine elements

The board paper has set a framework of nine elements that help the members to develop a comprehensive, consistent, and coordinated policy response. These nine elements or policy actions firstly include “safeguard monetary sovereignty and stability by strengthening monetary policy frameworks. Also do not grant crypto assets official currency or legal tender status.”

The framework noted about the “guard against excessive capital flow volatility and maintaining effectiveness of capital flow management measures. Proper analyzing and disclosing of fiscal risks while adopting unambiguous tax treatment of crypto assets. Establishing legal certainty of crypto assets and addressing legal risks.”

Furthermore, “develop and enforce prudential, conduct, and oversight requirements to all crypto market actors. And also establish a joint monitoring framework across different domestic agencies and authorities. Establish international collaborative arrangements to boost supervision and enforcement of crypto asset regulations. Monitor the impact of crypto assets on the stability of the international monetary system. Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance,” as mentioned in IMF’s board paper.

IMF also wrote in the paper that by adopting the framework, the policy makers can mitigate the risks associated with crypto assets and utilize the potential benefits of the technological innovation associated with it.

Meanwhile, the Executive Directors of IMF emphasized that IMF could serve as a “thought leader” in further analytical work on rapidly evolving developments in crypto assets.