The International Monetary Fund (IMF) and the Financial Stability Board (FSB) jointly published a comprehensive policy and regulatory response to crypto-asset activities on Thursday. The report, which addresses macroeconomic and financial stability risks posed by crypto-assets, provides a roadmap for effective, flexible, and coordinated implementation of the policy response.
The risks associated with crypto-assets are exacerbated by non-compliance with existing laws in some instances, the paper noted. It also pointed out that many of the claimed benefits from crypto-assets, such as cheaper and faster cross-border payments, and increased financial inclusion, have yet to materialize.
"Widespread adoption of crypto-assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability," the report stated.
The document suggests that jurisdictions should safeguard monetary sovereignty and strengthen monetary policy frameworks to address macroeconomic risks. It also recommends guarding against excessive capital flow volatility and adopting an unambiguous tax treatment of crypto-assets.
The report further encourages implementation of the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing (AML/CFT) standards to address risks to financial integrity and mitigate criminal and terrorist misuse of the crypto-assets sector.
In July 2023, the FSB had published a Global Regulatory Framework for Crypto-asset Activities, consisting of two distinct recommendations for the regulation, supervision, and oversight of crypto-asset markets and "global stablecoin arrangements". Earlier in February 2023, the IMF had released a note to the G20 on the Macrofinancial Implications of Crypto Assets. The current synthesis paper consolidates these key recommendations proposed by the FSB and IMF.
The paper will be presented to G20 leaders at a summit this month in New Delhi. While some jurisdictions like the European Union have approved comprehensive rules for crypto-assets, others have adopted a more patchy approach towards this borderless sector where fraud and manipulation are prevalent.
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