• The International Monetary Fund (IMF) has made recommendations to regulate the cryptosphere, including licensing, registering and authorizing service providers, additional oversight for entities carrying out multiple functions, and stringent prudential requirements for stablecoin issuers.
• Established financial institutions should be subject to clear requirements regarding the risks that arise from transacting in crypto, and a robust, global crypto regulation and supervision framework should be put in place.
• It is essential for a unified approach to be taken to adequately deal with the digital coins, as national authorities are proving to be ineffective on their own.
The International Monetary Fund (IMF) has recognized the need for a global framework for the regulation of cryptocurrencies and has provided a five-point plan to ensure the safety of exchanges and investors. Firstly, it is essential that crypto asset service providers are licensed, registered, and authorized, in order to protect customer assets and ensure that rules governing their services are comparable to those of the traditional financial sector. This is especially important in regards to storage, transfer, exchange, settlement, and custody services.
Secondly, entities that carry out many different functions in the cryptosphere should be subject to additional oversight. This is to prevent any conflict of interest and to ensure transparency in regards to all dependencies and operations. Thirdly, stablecoin issuers should be subject to strict prudential requirements as these are becoming increasingly popular and are used as a store of value for many investors. Without proper oversight and regulation, these holdings could destabilise monetary and financial stability. In cases of major stablecoins, a regulation on the scale of that employed in the banking sector could be required.
Fourthly, established financial institutions that deal in cryptocurrencies should be subject to clear requirements regarding the risks that arise from transacting in crypto. Lastly, the IMF is calling for a robust, global crypto regulation and supervision framework. This is due to the fact that the borderless nature of cryptocurrencies has highlighted the ineffectiveness of national authorities to adequately deal with the digital coins. Only a unified approach that can adapt to the rapid changes in the cryptosphere can provide the necessary protection for exchanges and investors.
The IMF’s five-point plan is a positive step towards proper regulation of the cryptosphere and should be taken seriously by both governments and businesses. It is essential that regulatory authorities, financial institutions, and crypto companies work together to ensure that a robust and effective framework is implemented in order to protect the interests of all involved.