TL;DR Breakdown
- IMF raises concern over crypto regulation.
- Calls countries to license crypto service providers, global crypto regulation.
- Says crypto is overprised.
The International Monetary Fund (IMF) has called for “comprehensive, consistent and coordinated” global regulation of the crypto industry after the world finance body raised concerns that digital assets could trigger “systemic” financial stability risks from the growing crypto sector.
The IMF made the call in a blog post on its website authored by Tobias Adrian, Dong He, and Aditya Narain. They argued the need for “comprehensive international standards” to address the risks posed to the financial system from cryptocurrencies. At the same time, they called for an “enabling environment for useful crypto asset products and applications.”
The authors said countries should license or authorize Crypto service providers such as exchanges and P2P providers in the blog post. They called for a clear distinction between services and products for investments versus those intended for payments, with the former being overseen by the securities regulator and the latter overseen by “the central bank or the payments oversight authority.”
They also recommended that financial institutions with exposure to crypto should have to adhere to “clear requirements,” including limits on exposure, investor suitability, and risk assessments.
Crypto overvalued? IMF’s real fear
In the blogpost, the IMF raised concerns over “cryptoization” of emerging markets and developing economies, where cryptocurrencies “replace domestic currency and circumvent exchange restrictions and capital management measures.”
In a tweet, IMF said the crypto market is overvalued with its $2.5 trillion market value.
“Crypto’ $2.5 trillion market value shows the significance of innovations like blockchain—and reflects that it’s overvalued. Our #IMFBlog explains how regulation can safeguard financial stability, they wrote.
Why IMF need strategy for global crypto regulation
Explaining the need for a strategy for global crypto regulation, the IMF noted that crypto poses a “cross-sector and cross-border remit” challenge as they cannot monitor it owing to different strategies towards the asset class adopted by different countries.
“Many crypto service providers operate across borders, making the task for supervision and enforcement more difficult,” the authors noted.
