A strategy for coordinating actions to prevent cryptoassets from compromising macroeconomic and financial stability was laid forth by international financial authorities and the International Monetary Fund on Thursday.
The Financial Stability Board, the IMF, and the G20’s risk watchdog, which monitors hazards, said in a study that in some cases, noncompliance with current regulations exacerbates such risks.
Many of the alleged advantages of cryptoassets, including faster and less expensive cross-border payments and greater financial inclusion, have not yet materialized, it was said.
According to the study, the widespread use of crypto-assets might jeopardize the effectiveness of monetary policy, evade capital flow control measures, worsen fiscal risks, divert funds that could be used to finance the real economy, and endanger global financial stability.
The report outlines deadlines for the implementation of recent suggestions to regulate cryptocurrency from the Financial Stability Board and IOSCO, a global body of securities regulators. These recommendations were made to the IMF and G20 countries.
The collapse of the cryptocurrency exchange FTX last November, which shook markets and left investors nursing losses, marked a significant development in regulatory thinking after several years of seeing no threat from the sector.
The report, which will be presented to the G20 leaders at a conference this month in New Delhi, claimed that a comprehensive policy and regulatory response for crypto-assets is required to address the risks of crypto-assets to macroeconomic and financial stability.
The first complete set of regulations for cryptoassets has been authorized by the European Union, while other regions have taken a patchier approach to a market with no borders where fraud and manipulation are “prevalent”.
According to the report, other factors include governments avoiding huge deficits that can result in inflation that weakens fiat currencies and promotes alternatives like cryptoassets.
Along with how current regulations apply to the industry, the tax treatment of cryptoassets should be clarified.
