Why a Worldwide Regulatory Framework for Cryptocurrency Assets is Necessary
A recent synthesis paper outlines the importance of establishing a worldwide regulatory framework for cryptocurrency assets. It emphasizes that evenย thoughย these assets are not yet broadly used in the worldwide financial system, they have theย capacity to become a wholeย lotย of source of systemic risk in certain jurisdictions.
To safeguard monetary sovereignty, it is recommended that cryptocurrency assets should not beย assigned official currency or legal tender status. This isย importantย to prevent exposure to price fluctuations that could impact Government revenues.
Central banks are advised against holding cryptocurrency assets in their official reserves due to theย dangers they pose to monetary and worldwide financial stability. Inย addition, clear tax treatment for cryptocurrency assets is essential to protect countriesโ monetary sovereignty.
Higher Risks for Developing Economies
Developing economies, especially those in emerging markets, may face higher macro-financial dangers associated with cryptocurrency assets. Factors such as less developed tax frameworks, a substantial unbanked population, and higher cross-border transaction costs contribute to this increased risk.
Althoughย while banning crypto-related activities mayย appear like a solution, the paper impliesย that short-term 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 Worldwide Collaboration
As the G20 continuesย its discussions on regulating cryptocurrency assets, this synthesis paper provides valuable insights for policymakers worldwide. It urges authorities to work together in establishing a worldwide regulatory framework to address theย dangers posed by cryptocurrency assets. By doing so, we can secure the stability and integrity of the worldwide financial system, protect monetary sovereignty, and encourage responsible usage of cryptocurrency assets.
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