IMF calls for coordinated approach to global crypto regulation
The international monetary fund (IMF) has called on regulators worldwide to work toward a coordinated effort to regulate the crypto market, as its effect has a far-reaching impact on global economies.
According to the IMF in its recent September bulletin, the crypto market, which reached a global market capitalization of $3 trillion in Nov. 2021, has become integrated into the mainstream financial system. As a result, there is an urgent need to regulate the market to prevent further contagion that may ruin the global economy.
The challenge, however, lies in adopting a coordinated effort toward crypto regulation. The fast-paced nature of crypto makes it difficult for regulators to keep tabs on thousands of actors involved in the market.
Applying the existing regulatory framework may be insufficient, as different use cases of crypto assets attract regulators, such as banks, commodities, and securities. While some regulators prioritize consumer protection, others optimize for safety, soundness, or financial integrity.
Diverging regulatory approaches
Several countries have been proactive on issues relating to crypto regulation. For example, countries like Japan and Switzerland have introduced legislative bills, while others like the European Union and the United States are at the drafting stage.
However, countries are taking different approaches to administer regulatory policies for crypto assets.
The IMF stated:
“At one extreme, authorities have prohibited the issuance or holding of crypto assets by residents or the ability to transact in them or use them for certain purposes, such as payments. At the other extreme, some countries have been much more welcoming and even sought to woo companies to develop markets in these assets.”
According to the IMF, the diverging regulatory approaches do not provide a level playing ground. As a result, many crypto actors have opted to migrate to a more friendly jurisdiction with the least regulatory constraint.
Call for global regulation
The IMF has called on national authorities to consider working towards a global regulatory framework to bridge the gap caused by fragmented regulations.
A comprehensive framework will cover all aspects of the crypto market while aligning with the mainstream regulatory system.
The IMF added:
“A global regulatory framework will bring order to the markets, help instill consumer confidence, lay out the limits of what is permissible, and provide a safe space for useful innovation to continue.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.