The International Monetary Fund (IMF) has collaborated with the Financial Stability Board (FSB) to publish a joint paper on crypto regulation. In the paper, the duo made various recommendations on how to efficiently regulate the crypto space. According to reports, the publication has been made available for consideration at the ongoing G20 summit in India.
The policy paper focuses on how countries can address the risks associated with crypto. Similarly, it proposes various methods of regulating activities related to stablecoins and Decentralized Finance (DeFi). The paper further described how the regulatory framework formulated by the IMF and FSB can interact and work together. The agencies admitted that crypto poses a threat to macroeconomic and financial stability. They want authorities to channel their policies towards addressing these risks in their respective countries.
Nevertheless, the recommendations made in the joint paper do not establish new policies or expectations for relevant authorities. Earlier, the IMF drafted a nine-point action plan to guide countries on how to address the issues of cryptocurrencies in their economies. The paper, titled “Elements of Effective Polices for Crypto assets” provided insight on important elements of appropriate policy response to crypto assets.
IMF warning countries against crypto exposure
In recent years, the agency warned countries against integrating crypto into their financial system owing to its extreme volatility. This explains why it criticized the El Salvador government for its adoption of Bitcoin as a legal tender. The IMF believes the adoption of crypto as a legal tender makes the country’s economy vulnerable. Then, it urged President Nayib Bukele to suspend the decision.
Don’t forget that the country adopted Bitcoin as a legal tender in 2021. At a Bitcoin conference in Miami, Bukele highlighted the various benefits of Bitcoin to the country’s financial landscape. According to Bukele, the adoption of the asset creates a pathway to financial freedom. He further that it also paves the way for the people of El-Salvador to transact value at their convenience. However, the IMF in its argument insisted that the adoption could increase money laundering and other illicit activities in El-Salvador. Likewise, it added that the country might be plunged into serious debt due to the instability of the crypto market.