The IMF signals for a stronger crypto regulatory framework

Cryptocurrencies have definitely become an important part of the financial ecosystem around the world.

Therefore, their impact on the economy is now unattainable. With a heavy reliance on cryptocurrencies, international financial bodies such as the International Monetary Fund are looking and planning to take a stricter approach to cryptocurrencies and their regulations.

Cryptocurrencies are becoming an integral part of economies around the world, and so the call to regulate them is now more important than ever.

As cryptocurrencies move from their niche to a major role in finance, as speculative assets or a means of payment, a regulatory framework must also be in place.

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Call to Action: Too Late?

The International Monetary Fund has expressed concern over the lack of a proper regulatory framework for cryptocurrencies.

Cryptocurrencies’ unprecedented, albeit volatile, growth in market capitalization has brought them into the regulated financial ecosystem, leading to a bit of ambiguity around the regulations surrounding cryptocurrencies.

Apart from this, cryptocurrencies have expanded into various products and services and facilitated the marketing and trading of new innovations.

The collapse of crypto exchanges, issuers and hedge funds, coupled with the recent decline in cryptocurrencies’ valuations, has led to a more active push to regulate cryptocurrencies.

IMF listed areas of concern

According to the International Monetary Fund, existing regulatory policies and frameworks are not applicable to cryptocurrencies for various reasons.

First, the world of crypto is constantly evolving. Being a relatively new player in the financial ecosystem, improvements are being made to improve cryptocurrencies and their utilities. Bodies around the world are finding it increasingly difficult to bring on board people who are skilled in the latest practices in the industry to create regulatory policies.

To further complicate the situation, the terminology used for various crypto-related activities is not uniform around the world.

Moreover, the dynamic cryptocurrency market is constantly moving. However, the data available to take that into account is still insufficient, and regulators struggle to keep tabs on various industry players, who are technically not required to report to the law under existing laws.

In addition to the above areas, national bodies and relevant bodies around the world need to come together to better implement regulatory policies and frameworks.

If the entire cryptocurrency ecosystem was closed to the outside world, the aforementioned concerns would be less of an issue. However, in recent years, the industry has grown, and now it is not like that. There are players in the ecosystem who are vying for funding and vying to expand into different areas.

Countries around the world are taking action.

Many countries are taking steps to settle cryptocurrencies with what they consider to be the most feasible tools.

Countries such as Japan and Switzerland have revised or introduced new laws covering cryptocurrencies and their providers, while countries such as the United Kingdom, United Arab Emirates, European Union, and the United States are drafting laws for their citizens.

Conversely, there are countries that intend to ban cryptocurrencies and related assets by prohibiting their residents from issuing or owning crypto assets.

IMF proposal solution

Authorities in countries around the world are taking different approaches to solve this problem by developing a regulatory framework that is suitable for everyone and regulates the cryptocurrency market as much as possible.

The International Monetary Fund suggests a system that can be easily monitored and implemented by national authorities around the world. This IMF-recommended approach rests primarily on three pillars.

Integrated

Any regulatory framework developed in relation to cryptocurrencies should be done in an integrated manner. This is to avoid cross-sector and cross-border regulatory loopholes and ensure a level playing field for all players.

Consistent

As the cryptocurrency market constantly evolves and develops, regulatory frameworks need to be consistent. This is to ensure that they are in compliance with the main regulations.

Comprehensive

Regulations for cryptocurrencies should be comprehensive. It covers all the actors and aspects of the crypto ecosystem.

Conclusion: Rules that don’t stifle innovation

The unprecedented rise of cryptocurrencies has come as a surprise to many around the world. Governments and national bodies around the world are now enacting legislation and taking steps to accommodate cryptocurrencies in their economies.

As institutional investors express interest in cryptocurrencies, and make them a more mainstream part of the financial system, the IMF and other bodies are expected to step in to help regulate them.

The question though is whether future regulations will be able to accommodate the current cryptocurrencies in the ecosystem without stifling the upcoming innovations the industry has to offer.

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