The International Monetary Fund (IMF) is in favor of regulating crypto assets rather than imposing a complete ban, although the option to ban remains on the table. IMF Managing Director Kristalina Georgieva stated that the private issuances of cryptocurrencies must be regulated.
“Digital assets are nothing, they cannot be accepted as legal tender,” said Georgieva during a discussion with the IMF board. She further emphasized the need for strong regulation and the possibility of banning crypto assets if regulation fails or implementation is slow and they pose a risk to financial stability.
Additionally, the Bank for International Settlements and The Financial Stability Board are also committed to establishing a regulatory framework for private cryptocurrencies.
India, who heads the G-20, supported the discussions and raised important policy questions that policymakers and regulators need to evaluate closely. India also highlighted an existential question of whether cryptocurrencies are the optimal solution for existing challenges in the global financial system.
IMF’s Stance on Crypto Assets
Georgieva spoke with Bloomberg about the possibility of banning digital assets but stressed the importance of distinguishing between state-backed central bank digital currencies and publicly issued crypto assets and stablecoins.
While fully-backed stablecoins have economic benefits, non-backed digital assets are viewed as speculative, high-risk, and not a valid form of currency, she explained.
The IMF is preparing to release regulatory framework guidelines in collaboration with the Financial Stability Board and the Bank for International Settlements in the second half of the year.
IMF Warns that Inability To Protect Consumers Could Trigger A Ban
Georgieva cautioned that the lack of consumer protection in the rapidly changing realm of digital assets could be the main driver for implementing a cryptocurrency ban. She recommended that instead of a ban, prioritizing sound regulations, consistency, and consumer protection would be a more suitable approach.
In a recent paper recommending global regulation standards, Georgieva highlighted that digital assets could not be legal tender because they are not backed. The statement aligns with her earlier remark that regulation is necessary in the world of private issuances.
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