If you have spent enough time in the crypto industry, you are aware that the International Monetary Fund (IMF) has not been a friend to the DeFi industry. According to IMF Managing Director Kristalina Georgieva, the IMF would prefer to differentiate and regulate crypto assets over enforcing a complete ban. At the same time, the nuclear option will remain on the table for the time being.
IMF opts to regulate crypto
On the margins of the G20 finance ministers’ conference in Bengaluru, India, IMF Managing Director Kristalina Georgieva described how the United Nations financial agency views digital assets and what it would want to see in terms of regulation.
According to Georgieva, the IMF’s major goal is to regulate the world of digital currencies. She claims that fully supported stablecoins offer a “fairly good environment for the economy.” On the other hand, unbacked crypto assets are speculative, high-risk, and not actual currency.
The IMF aims to differentiate between state-backed digital currencies generated by central banks and openly traded crypto assets such as stablecoins. “We are very much in favor of regulating the world of digital money,” and she stated this is a top priority.
During an interview with Bloomberg published on Feb. 27, she responded to an inquiry on her recent comments regarding a potential comprehensive ban on cryptocurrencies. She stated that there is still some ambiguity regarding the categorization of digital currency.
Our first objective is to differentiate between central bank digital currencies that are backed by the state and publically issued crypto assets and stablecoins.
Kristalina Georgieva
According to Georgieva, digital assets consist of two components: technology and policy, and they require development space. Now, policies are being developed to safeguard user information, protect customers from harm, and maintain transaction transparency.
Georgieva also emphasized that the IMF advocated regulation over a ban and cautioned that a ban “should not be taken off the table” if cryptocurrencies pose a greater threat to financial stability. The IMF, the Financial Stability Board, and the Bank for International Settlements are collaborating to produce regulatory framework guidelines for publication in the second half of this year (BIS).
Additionally, she cited a recent report advocating global regulation norms to argue that unbacked crypto assets cannot be legal currency. She responded that the failure to protect consumers from the rapidly evolving world of crypto assets would be the key impetus for the decision to prohibit crypto.
In the second part of the year, the IMF, the Financial Stability Board, and the Bank for International Settlements will produce regulatory framework guidelines.
The IMF’s 9-point action
The first recommendation of the IMF’s nine-point action plan is to refrain from making bitcoin (BTC) and other cryptocurrencies legal tender. The policy describes how countries should manage crypto assets.
The executive board of the world’s lender of last resort discussed the document “Elements of Effective Policies for Crypto Assets,” which provides recommendations to IMF member countries on critical features of an effective policy response to crypto assets.
As a number of crypto exchanges and assets have failed over the past few years, the fund has stated that such activities have become a focus for authorities and that it is “untenable” to continue as before.
To “safeguard monetary sovereignty and stability by improving monetary policy frameworks and do not issue crypto assets official currency or legal tender status” was the key recommendation.
Additional ideas included avoiding excessive money flows, establishing clear tax regulations and legislation regarding crypto assets, and developing and implementing supervisory criteria for all crypto market participants.
The IMF chastised El Salvador in 2021 for becoming the first country in the world to accept bitcoin as legal tender; the Central African Republic quickly followed El Salvador’s lead.
Additionally, during the G20 conference, US Treasury Secretary Janet Yellen emphasized the importance of establishing a strong regulatory framework for crypto assets. Nonetheless, she stated that the US has not imposed any limitations on these assets.
We have not advocated the outright prohibition of cryptocurrency operations, but it is essential to establish a robust regulatory framework. We collaborate with other governments.
US treasury Secretary Janet Yellen
Regulation, predictability, and consumer protection are the greatest strategies for controlling the crypto industry. The United States and the IMF do not advocate the nuclear option of a complete ban, but it remains an option. When the IMF, FSB, and BIS collaborate on regulatory framework principles, a standard and exhaustive strategy for regulating crypto assets is expected to develop.
Source: https://www.cryptopolitan.com/imfs-stand-on-regulating-or-banning-crypto/