The International Monetary Fund (IMF) , through its directors of the Monetary and Capital Markets Department Tobias Adrian, Dong He and Aditya Narain, has called for the cryptocurrency market to be regulated globally .
This world body seeks to apply a “comprehensive, coherent and coordinated” regulation to bitcoin and other digital currencies to “safeguard the stability of the international monetary and financial system”, which is being “profoundly” changed by crypto assets.
In a blog post Adrian, He and Narain warn of “the risks of this evolving sector, in which many activities are not regulated” and even point out that “ these risks to financial stability could soon become systemic in some countries ”.
Experts allude to the fact that ” crypto assets and associated products and services have grown rapidly in recent years,” but that this is still an unregulated financial system . In fact, they are concerned that “interconnections” with the financial system that is [regulated] are increasing.
Determining the valuation, they claim “is not the only challenge in the crypto ecosystem.” “Identifying, monitoring and managing risks challenges regulators and businesses. These include, for example, the operational and financial integrity risks of crypto asset exchanges and wallets, investor protection and inadequate reserves, and inaccurate disclosure of some stablecoins. ”
Furthermore, they stress “in emerging markets and developing economies, the advent of cryptography can accelerate what we have called ‘cryptoization’, when these assets replace the national currency and bypass exchange restrictions and account management measures. capital”.
For all these reasons, the IMF calls for ” comprehensive international standards ” that more fully address the risks that cryptocurrencies can pose to the financial system, as well as its associated ecosystem and related transactions, “while allowing an environment conducive to products. and useful crypto asset applications ”.
The goal is for the Financial Stability Board to develop “a global framework comprising standards for the regulation of crypto assets” to provide “a comprehensive and coordinated approach” to managing risks to financial stability and market conduct. And they want it to be applicable “consistently across jurisdictions.”
In his opinion, it is not effective for each country to have its own approach and adopt its own strategy : “Existing laws and regulations may not allow national approaches that comprehensively cover all the elements of these assets. Importantly, many encryption service providers operate across borders, making monitoring and enforcement difficult. Uncoordinated regulatory measures can facilitate potentially destabilizing capital flows, “they say.
What would a global regulation consist of, according to the IMF?
Adrian, He and Narain argue that the global regulatory framework should “provide a level playing field across the spectrum of activities and risks” and for this the regulation should contain at least the following three elements :
Crypto asset service providers that provide critical functions must be licensed or authorized. These would include storage, transfer, settlement and custody of reserves and assets, among others, similar to the existing rules for financial service providers. The licensing and authorization criteria must be clearly articulated, the responsible authorities must be clearly designated and the coordination mechanisms between them must be well defined.
Requirements should be tailored to the main cryptoassets and stablecoins use cases. For example, services and products for investments should have requirements similar to those of brokers and dealers, supervised by the securities regulator, and services and products for payments should have requirements similar to those of bank deposits, supervised by the central bank or payment supervisory authority. Regardless of the initial authority to approve crypto products and services, all supervisors, from central banks to securities and banking regulators, must coordinate to address the various risks that arise from different and changing uses.
Authorities must provide clear requirements to regulated financial institutions regarding their exposure and commitment to cryptocurrencies. For example, appropriate banking, securities, insurance and pension regulators should stipulate capital and liquidity requirements and exposure limits to different types of these assets, and require risk and suitability assessments of investors. If regulated entities provide custodial services, the requirements need to be clarified to address the risks arising from those functions.