Emerging from the collective thoughts of the Financial Stability Board (FSB) and the International Monetary Fund (IMF) is a joint policy roadmap that takes a firm stand against absolute prohibitions on cryptocurrencies. This modern policy framework, backed by the leadership of G20 under India, advocates strongly for extensive regulatory supervision to counter risks consequent of crypto-assets.
Underlining the commitment to establish global standards for the burgeoning crypto industry, the IMF-FSB paper is intended for presentation to the G20. The document emphasizes on the vital role of robust monetary policy structures, effective management of capital flow instabilities and establishing a clear tax treatment for cryptocurrencies to address macroeconomic hazards.
Blanket bans on cryptocurrencies, it seems, only intensify the risks rather than containing them. The study proposes targeted restrictions as potential safeguards, particularly beneficial for growing economies. It’s worth noting here that countries like India have vocalized apprehensions regarding the possible effects widespread crypto usage could have on monetary policies within developing nations.
The inclusive ban on cryptocurrencies, as detailed in the report, would essentially criminalize all crypto activities within a jurisdiction. Highlighting the challenges emanating from such prohibitions, the document advises regulatory bodies that an outright ban not only creates additional risks but it also drives crypto-related activities to other jurisdictions. The paper points out that due to the inherent borderless nature of cryptocurrencies, such bans might may even result in potentially heightened financial integrity risks and create inefficiencies.
The report posits that restrictions shouldn’t overrule credible institutional frameworks, robust macroeconomic policies, and comprehensive regulation and oversight—the primary shields against the macroeconomic and financial risks bounding crypto-assets.
The IMF and FSB suggest a strategic approach, recommending earmarked and short-term restrictions to contain specific risk variables during tumultuous times or while seeking indigenous solutions. The document throws light on some of these restrictions including targeted measures against privacy coins in Dubai or a ban on Nigerian banks serving crypto firms.
Addressing apprehensions surrounding stablecoins — cryptocurrencies linked to the value of other assets or currencies, the report claims an unsupervised proliferation could potentially cause havoc such as currency replacement or bank runs in nascent economies. The report also raises issues associated with maintaining a stable value and dependencies on private issuers, citing the de-pegging of algorithmic stablecoin terraUSD which caused massive capital losses.
Conclusively, the paper posits that discussions within the G20 can aid regulatory bodies when it comes to data requirements, creating an environment conducive for the collaboration of statistical agencies with regulators to influence regulations regarding data criteria for crypto-assets. It’s clear that the future of cryptocurrencies, while laden with opportunities, requires careful navigation and international cooperation.
Source: Cryptonews
