The International Monetary Fund (IMF) executive board has issued guidance for member countries to develop effective crypto policies. The IMF highlighted the importance of developing comprehensive crypto regulations that would help mitigate the risks posed by crypto assets while harnessing the potential benefits of technological innovation.
In a statement released on Thursday, the IMF announced the outcome of a discussion held by its executive board directors on a paper titled “Elements of Effective Policies for Crypto Assets.” The paper proposes a regulatory framework that “can help members develop a comprehensive, consistent, and coordinated policy response” to crypto assets.
The IMF emphasized that policymakers could better mitigate the risks posed by crypto assets while harnessing the potential benefits of technological innovation by adopting the framework.
The framework sets forth several elements, including safeguarding monetary sovereignty and stability by strengthening monetary policy frameworks, avoiding the granting of official currency or legal tender status to crypto assets, guarding against excessive capital flow volatility, and adopting unambiguous tax treatment of crypto assets.
The framework also calls for enforcing prudential, conduct, and oversight requirements to all crypto market actors, establishing a joint monitoring framework across different domestic agencies and authorities, and international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations.
The executive board directors “generally observed that while the supposed potential benefits from crypto assets have yet to materialize, significant risks have emerged,” the IMF stated. They agreed that crypto assets should not be granted official currency or legal tender status in order to safeguard monetary sovereignty and stability.
Moreover, “crypto assets have implications for policies that lie at the core of the Fund’s mandate,” particularly their widespread adoption “could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks,” the directors warned.
The IMF further conveyed that its executive board directors “broadly agreed on the need to develop and apply comprehensive regulations, including prudential and conduct regulation to crypto assets, and effective implementation of the FATF [Financial Action Task Force] standards.” The directors also stated that the IMF “should work closely to support the regulatory work under the leadership and guidance of standard-setting bodies.”
While a few directors thought that outright cryptocurrency bans should not be ruled out, the IMF pointed out that strict bans are not the first-best option. The directors agreed that targeted restrictions could apply, depending on domestic policy objectives and where authorities face capacity constraints.
The directors stressed the importance of promoting the principle of “same activity, same risk, same regulation.” They emphasized that “Strong coordination between authorities, both at the domestic and international levels, is critical for consistent implementation and avoiding regulatory arbitrage.” They concluded that the IMF “could serve as a thought leader in further analytical work on rapidly evolving developments in crypto assets.”