IMF urges regulators to catch up on digital-asset regulation

Bankruptcies among issuers, exchanges and hedge funds have provided added impetus to the push for a comprehensive regime governing digital assets. The IMF said.

The failures of crypto issuers, exchanges and hedge funds have added impetus to the push to regulate these digital assets. Read more in F&D. https://t.co/Vfyr4uN6NY pic.twitter.com/4LF9P3DZpc

— IMF (@IMFNews) September 5, 2022

Experts at the IMF say that cryptocurrencies have moved from niche products to mass-market use. They are used for speculation, hedging against currency depreciation, and as payment instruments.

The authors of the papers acknowledged the difficulties in crafting a regulatory framework for the new asset class due to rapid evolution of markets, monitoring challenges and a lack of practical expertise among supervisory authorities.

Experts pointed to an inconsistent approach to regulating digital assets, calling for a coordinated and comprehensive global framework.

“Some agencies may prioritise consumer protection, others — safety and soundness or financial integrity. There is a whole range of participants in the industry — miners, validators, protocol developers — that are not easily covered by traditional financial regulation.”, IMF said.

Experts say that a global regulatory framework would bring order to the markets, help build consumer trust, set boundaries for what is permissible, and provide a safe space for continued innovation.

As noted earlier, in July the Council of the European Union and the European Parliament provisionally agreed on the provisions of the Markets in Crypto Assets regulation MiCA. It describes rules applying to issuers of unbacked crypto assets, stablecoins, trading and custody platforms.

Subsequently, members of the European Greens and Socialists proposed extending AML/CFT procedures to decentralized organizations, DeFi platforms and NFT platforms.

Earlier, U.S. Senators Cynthia Lummis and Kirsten Gillibrand introduced legislation to regulate the industry.

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