- The fund insists that the global financial stability is a top priority in regulating digital assets.
- If need be, IMF could also consider banning cryptos that lack ‘a backing.’
The International Monetary Fund is calling for more regulations in digital currencies, including a possible ban on cryptocurrencies not fully backed, if it feels consumer protection is not guaranteed.
Speaking during the sidelines of the G20 finance ministers meeting in Bengaluru, India, IMF Managing Director Kristalina Georgieva said the first step in regulating the sector was to differentiate digital assets between – the central bank digital currencies CBDC (backed by their respective states), backed stablecoins, and the non-backed cryptocurrencies.
See Related: India Discusses Cryptocurrency At G20 Conference
The CBDC and stablecoins ‘creates a reasonably good space for the economy,’ says Georgieva, while crypto assets with no backing are purely speculative and risky to the investors. She added that the latter cannot be made a legal tender because they lack the definition of money of – holding value and being predictable into the future.
A Total Ban If Crypto Poses A Risk To The Financial Stability
The interview, which aired on Bloomberg February 27, noted that all the global agencies were keen on regulating digital money. When asked at what point crypto could attract a blanket ban, the executive said that could only happen if the assets pose risks to global financial stability.
‘‘We believe that for the Financial Stability Board, the IMF and Bank for International Settlements, (regulations) is a top priority. We also recognize that if regulations are slow to come and if crypto assets become a high risk for consumers and for financial stability, the option of a possible ban that some countries are insisting on, including India, should not be taken off the table,’’ Georgieva said.
Her comments echo a report published by the fund in December last year on ‘some key elements of crypto regulations’ in the wake of the collapse of FTX. In the publication, the body said that crypto asset service providers should be licensed, registered, and authorized. More importantly, it noted that customer funds should be segregated from the other functions of the service providers. Traditional financial firms’ regulations and exposure risks are also paramount to the IMF.
