IMF urges stronger regulation of cryptocurrencies

The International Monetary Fund (IMF) has said that regulation of the cryptocurrency industry needs to be strengthened, as its growth “creates a number of problems and risks for financial stability”.

The #crypto ecosystem—what is it, and what’s at risk? Our latest #IMFBlog discusses what’s needed to strengthen operational, governance, and risk practices. https://t.co/jLyTiRO7mb pic.twitter.com/488qDHI1RO

— IMF (@IMFNews) October 1, 2021

In IMF’s view, many players in the sector lack robust governance and risk-management practices.

“(pseudo)anonymity of crypto assets also creates data gaps for regulators and may open undesirable doors for money laundering, as well as financing of terrorism. […] Moreover, the crypto ecosystem falls under different legal regimes in different countries, which complicates coordination,” the statement said.

Experts at the IMF also drew attention to stablecoins. They noted that the term “covers a very diverse group of crypto assets and can be misleading,” and that stablecoins themselves have the power to influence the financial system.

“Fiscal policy threats may also intensify given the potential for crypto assets to avoid taxes. […] Increased demand for them could contribute to capital outflows affecting the foreign exchange market,” the experts added.

In their view, the exodus of miners from China to jurisdictions with emerging markets and developing countries threatens additional strain on domestic energy consumption.

The IMF said regulators should bolster cooperation, adopt a coordinated approach to cryptocurrency regulation, pay attention to implementing existing global standards and developing CBDC.

Earlier the IMF criticized the legalization of Bitcoin by El Salvador. In the organisation’s view, this decision could entail a number of risks and regulatory issues.

In July, the IMF said it would play a ‘key role’ in the move to digital money.

Follow ForkLog news on Telegram: ForkLog Feed — the full news stream, ForkLog — the most important news, infographics and opinions.