Efforts to establish a worldwide policy approach for cryptocurrency gain momentum
The International Monetary Fund (IMF) and the Financial Stability Board (FSB) of the G20 have taken a wholeย lotย of step towards coordinating action on cryptocurrency. In a joint white paper, they emphasized the necessity of a comprehensive policy and regulatory response to address theย dangers associated with crypto-assets and their probable impact on macroeconomic and financial stability.
Despiteย theย factย that the authors of the paper recognize the limited connection between cryptocurrency and traditional finance, they argue that widespread adoption of digitalย currencies would undermine the effectiveness of monetary policy and pose a threat to stability if granted legal tender status.
The paper outlines the collaborative efforts between the IMF, FSB, and other agencies to monitor the disruptive probable of cryptocurrency. It likewise outlines the implementation of high-level recommendations made by the FSB earlier this year.
Protecting economies from probable risks
The paper impliesย that jurisdictions should take measures to safeguard monetary sovereignty, strengthen monetary policy frameworks, mitigate excessive financialย resources flow volatility, and establish clear tax treatment for crypto-assets to protect their economies from probable problems.
Althoughย while the paper does not introduce new recommendations, its focus is on identifying dangers and providing a roadmap for the future.
Concerns over stablecoins and CBDCs
The FSB and IMF expressed concerns about the widespread use of stablecoins, warning that itย might lead to fragmentation in worldwide payments. They cited the 2022 collapse of the Luna/ Terraย (LUNA) ecologicalย system as an example of how a single failure could have ripple effects in the market.
Notably, the latest report does not cover monetaryย authority digitalย currencies (CBDCs), regardlessย of the increasing number of countries planning toย makeย available them. The paper likewise does not mention non-fungible tokens (NFTs).
Hot Take
The joint white paper by the IMF and FSB underscores the need for a comprehensive policy and regulatory response to theย dangers posed by crypto-assets. It emphasizes the importance of safeguarding monetary sovereignty, strengthening monetary policy frameworks, and adopting clear tax treatment for crypto-assets. Althoughย while stablecoins and their probable impact on worldwide payments are a concern, the report does not address monetaryย authority digitalย currencies or non-fungible tokens. The collaborative efforts and roadmap outlined in the paper intendย to protect economies and maintain financial stability in the face of evolving cryptocurrency technologies.
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