Why a Global Regulatory Framework for Crypto Assets is Necessary
A recent synthesis paper highlights the importance of establishing a global regulatory framework for crypto assets. It emphasizes that while these assets are not yet widely used in the global financial system, they have the potential to become a significant source of systemic risk in certain jurisdictions.
To safeguard monetary sovereignty, it is recommended that crypto assets should not be granted official currency or legal tender status. This is crucial to prevent exposure to price fluctuations that could impact government revenues.
Central banks are advised against holding crypto assets in their official reserves due to the risks they pose to monetary and global financial stability. Additionally, clear tax treatment for crypto assets is essential to protect countries’ monetary sovereignty.
Higher Risks for Developing Economies
Developing economies, especially those in emerging markets, may face higher macro-financial risks associated with crypto assets. Factors such as less developed tax frameworks, a substantial unbanked population, and higher cross-border transaction costs contribute to this increased risk.
While banning crypto-related activities may seem like a solution, the paper suggests that temporary restrictions should not replace robust macroeconomic policies. Instead, effective frameworks, comprehensive oversight, and targeted restrictions where necessary should be implemented to mitigate these risks.
Hot Take: The Need for Global Collaboration
As the G20 continues its discussions on regulating crypto assets, this synthesis paper provides valuable insights for policymakers worldwide. It urges authorities to work together in establishing a global regulatory framework to address the risks posed by crypto assets. By doing so, we can ensure the stability and integrity of the global financial system, protect monetary sovereignty, and promote responsible usage of crypto assets.
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