Global financial regulators and the International Monetary Fund on Thursday laid out a roadmap to coordinate actions to prevent crypto assets from undermining macroeconomic and financial stability. Such risks are in some cases exacerbated by non-compliance with existing laws, the G20 risk watchdog, the Financial Stability Board and the IMF said in a paper.
Many of the claimed benefits of crypto assets, such as cheaper and faster cross-border payments and greater financial inclusion, have not yet materialized, it said.
“Widespread adoption of crypto assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available to finance the real economy, and threaten global financial stability,” the paper said.
The paper sets out timelines for IMF and G20 members to implement recent crypto regulation recommendations from the Financial Stability Board and IOSCO, a global group of securities regulators.
It marks a further development in regulatory thinking after several years of little threat to the sector, with attitudes hardening following the collapse of crypto exchange FTX last November, which rattled markets and left investors with losses.
“A comprehensive policy and regulatory response to crypto assets is necessary to address the risks posed by crypto assets to macroeconomic and financial stability,” says the paper, which was presented to G20 leaders at a summit this month will be presented in New Delhi.
The European Union has adopted the world’s first comprehensive set of rules for crypto assets, but elsewhere there is a more inconsistent approach in a borderless sector where fraud and manipulation are “widespread.”
Other elements include governments avoiding large deficits that can lead to inflation that weakens fiat currencies and encourages substitutes such as cryptoassets, the paper says.
It should also outline the tax treatment of crypto assets and the application of existing laws to the sector.
© Thomson Reuters 2023