Global financial regulators and the International Monetary Fund on Thursday laid out a roadmap for coordinated measures to stop crypto assets from destabilizing macroeconomic and financial stability. The G20 risk watchdog, the Financial Stability Board and the International Monetary Fund said in a paper that in some cases such risks could be exacerbated by non-compliance with existing laws.
It added that many of the purported benefits of crypto assets, such as cheaper and faster cross-border payments and increased financial inclusion, have yet to be realized.
“Widespread adoption of cryptoassets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources that could be used to finance the real economy, and threaten global financial stability,” the report said.
The document sets out a timeline for the IMF and G20 members to implement recent cryptocurrency regulatory recommendations from the Financial Stability Board and the International Organization of Securities Commissions, a global securities regulator.
It marks a further evolution in regulatory thinking, which has seen little threat to the industry for years and hardened following the collapse of cryptocurrency exchange FTX last November, which shocked markets and cost investors .
“A comprehensive policy and regulatory response to crypto-assets is needed to address the risks to macroeconomic and financial stability from crypto-assets,” said the document, which will be presented to G20 leaders at a summit in New Delhi this month.
The European Union has approved the world’s first comprehensive set of rules for crypto assets, but the practice of fraud and manipulation in a “pervasive” borderless industry has been imperfect elsewhere.
Other factors include the government’s avoidance of large deficits, which could lead to inflation that weakens fiat currencies and encourages alternatives such as crypto assets, the paper said.
It should also detail the tax treatment of crypto assets and how existing laws apply to the industry.
© Thomson Reuters 2023
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