The International Monetary Fund (IMF) and the Financial Stability Board (FSB) took a significant step toward the future of crypto regulation by publishing a joint policy paper. At the behest of the Indian G20 Presidency, these organizations consolidated diverse standards and collective recommendations to offer guidance and help various regions address the volatile risks associated with crypto asset activities.
A focal point in the policy paper pertains to the regulation of activities related to stablecoins and decentralized finance (DeFi). This suggests that there is global attention shifting toward the often exciting, yet precarious world of DeFi. While this branch of cryptocurrency aims to recreate and improve upon the existing financial systems in a decentralised manner, it’s critical to recognize its propensity for rapid change and inherent risk.
The policy paper also shed light on how the regulatory frameworks and policies developed by both the IMF and the FSB could potentially work in concert. Optimization between these frameworks could result in a more robust regulatory environment which is able to adapt according to the dynamic nature of the crypto market. Yet, it’s important to note that despite its forward-thinking direction, the paper does not set and establish any new policies, recommendations, or expectations for relevant authorities. This seats the document as a guide rather than a commitment to enforce.
On the flip side, the absence of new tangible policies does raise questions about the practical application of these recommendations. If the standards provided cannot be enforced, the suggestions may not lead to significant shifts in how crypto asset activities are handled. Market perception is sensitive, and if it fails to see substantial changes in regulatory practices, it may continue to regard cryptos as wild and unruly as the classic Wild West.
Simultaneously, the regulatory ambiguity in the current crypto landscape doesn’t scuttle the opportunity for self-regulation. Businesses moving in the crypto ecosystem might view this as an opportunity to establish a compliance routine in accordance with the best practices suggested by these influential organizations.
In summation, the joint policy paper from the IMF and FSB is an important stride in recognizing and dealing with the challenges posed by the crypto market. The key to ensuring a safe yet innovative future of crypto lies in an effective synthesis between paper recommendations and practical application.
Source: Cointelegraph
