IMF calls for coordinated approach to global crypto regulation

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The inter­na­tion­al mon­e­tary fund (IMF) has called on reg­u­la­tors world­wide to work toward a coor­di­nat­ed effort to reg­u­late the cryp­to mar­ket, as its effect has a far-reach­ing impact on glob­al economies.

Accord­ing to the IMF in its recent Sep­tem­ber bul­letin, the cryp­to mar­ket, which reached a glob­al mar­ket cap­i­tal­iza­tion of $3 tril­lion in Nov. 2021, has become inte­grat­ed into the main­stream finan­cial sys­tem. As a result, there is an urgent need to reg­u­late the mar­ket to pre­vent fur­ther con­ta­gion that may ruin the glob­al economy.

The chal­lenge, how­ev­er, lies in adopt­ing a coor­di­nat­ed effort toward cryp­to reg­u­la­tion. The fast-paced nature of cryp­to makes it dif­fi­cult for reg­u­la­tors to keep tabs on thou­sands of actors involved in the market.

Apply­ing the exist­ing reg­u­la­to­ry frame­work may be insuf­fi­cient, as dif­fer­ent use cas­es of cryp­to assets attract reg­u­la­tors, such as banks, com­modi­ties, and secu­ri­ties. While some reg­u­la­tors pri­or­i­tize con­sumer pro­tec­tion, oth­ers opti­mize for safe­ty, sound­ness, or finan­cial integrity.

Diverging regulatory approaches

Sev­er­al coun­tries have been proac­tive on issues relat­ing to cryp­to reg­u­la­tion. For exam­ple, coun­tries like Japan and Switzer­land have intro­duced leg­isla­tive bills, while oth­ers like the Euro­pean Union and the Unit­ed States are at the draft­ing stage.

How­ev­er, coun­tries are tak­ing dif­fer­ent approach­es to admin­is­ter reg­u­la­to­ry poli­cies for cryp­to assets.

The IMF stated:

“At one extreme, author­i­ties have pro­hib­it­ed the issuance or hold­ing of cryp­to assets by res­i­dents or the abil­i­ty to trans­act in them or use them for cer­tain pur­pos­es, such as payments.

At the oth­er extreme, some coun­tries have been much more wel­com­ing and even sought to woo com­pa­nies to devel­op mar­kets in these assets.”

Accord­ing to the IMF, the diverg­ing reg­u­la­to­ry approach­es do not pro­vide a lev­el play­ing ground. As a result, many cryp­to actors have opt­ed to migrate to a more friend­ly juris­dic­tion with the least reg­u­la­to­ry constraint.

Call for global regulation

The IMF has called on nation­al author­i­ties to con­sid­er work­ing towards a glob­al reg­u­la­to­ry frame­work to bridge the gap caused by frag­ment­ed regulations.

A com­pre­hen­sive frame­work will cov­er all aspects of the cryp­to mar­ket while align­ing with the main­stream reg­u­la­to­ry system.

The IMF added:

“A glob­al reg­u­la­to­ry frame­work will bring order to the mar­kets, help instill con­sumer con­fi­dence, lay out the lim­its of what is per­mis­si­ble, and pro­vide a safe space for use­ful inno­va­tion to continue.”

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