The paper titled “Elements of Effective Policies for Crypto Assets” addresses questions raised by countries on the benefits and risks of crypto assets and on how to structure appropriate policy responses.
IMF Executive Board said that efforts to put in place effective policies for crypto assets have become a “key policy priority” for authorities, amid the failure of various exchanges and other actors within the crypto ecosystem, as well as the collapse of certain crypto assets.
“Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn,” it said.
The IMF paper suggested a framework of nine elements to help member countries formulate a crypto policy.
1. Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.
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2. Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures.3. Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets.
4. Establish legal certainty of crypto assets and address legal risks.
5. Develop and enforce prudential, conduct, and oversight requirements to all crypto market actors.
6. Establish a joint monitoring framework across different domestic agencies and authorities.
7. Establish international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations.
8. Monitor the impact of crypto assets on the stability of the international monetary system.
9. Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.
It said that by adopting this framework, policy makers can better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation associated with it.
Outlining its Executive Board’s assessment, IMF said that directors agreed strict bans are not the first-best option, but that targeted restrictions could apply.
“A few Directors, however, thought that outright bans should not be ruled out,” it added.
India proposes technical paper on crypto at G20
During a seminar titled “Policy Perspectives: Debating the Road to Policy Consensus on Crypto Assets”, Indian Presidency proposed a joint technical paper by the IMF and the Financial Stability Board (FSB) which would synthesise the macroeconomic and regulatory perspectives of crypto assets.
This would help in the formulation of a coordinated and comprehensive policy approach to crypto assets, the finance ministry said in a statement.
“The international organisations are expected to present their joint paper during the 4th Finance Ministers and Central Bank Governors meeting in October 2023,” it added.
At the G20 meeting on Saturday, IMF reiterated that banning private cryptocurrencies should be an option.
“We have to differentiate between central bank digital currencies that are backed by the state and stable coins, and crypto assets that are privately issued,” said IMF Managing Director Kristalina Georgieva.
“There has to be very strong push for regulation… if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk.”
US Treasury Secretary Janet Yellen, however, said she had not suggested the “outright banning of crypto activities, but it was critical to put in place a strong regulatory framework.”
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