International Monetary Fund Proposes New Policy Framework for Countries to Regulate Cryptocurrencies

In the latest development, the International Monetary Fund (IMF) has proposed policy framework that different countries can use to regulate digital assets. Over the past few years, each country has been working on its own framework for digital assets.

The latest move by the IMF will give countries to adopt a common standard for regulating crypto assets. The IMF framework comprises of nine elements including key aspects such as protecting monetary sovereignty, analyzing and disclosing financial risks, and creating practical, conduct, and oversight requirements for all digital assets.

Note that this is not a legally binding guidance but would instead serve as a model for crypto policies. Earlier this month on February 8, IMF’s Executive Board met to formulate the "Elements of Effective Policies for Crypto Assets”.

The proposed framework has, however, drawn mixed reactions from the crypto community. Some industry players have welcomed the guidelines calling it a step towards higher legitimacy and acceptance of digital assets.

However, other believe that the IMF might seeks to complete ban on digital assets in the future. The crypto community noted that the IMF is expecting a greater control over digital assets. One is likely due t their concerns of crypto assets disturbing the stability of global economy and bypassing the system “entirely”.

In its press release, the IMF noted that strict bans on cryptocurrencies would not be the best option for the nascent industry. But some IMF directors haven’t ruled out the possibility of an outright ban.

Another major concern the crypto community has regarding the IMF framework is how their policy guidelines can limit innovation in the crypto space. It would also make it difficult for new and small scale players to participate in the crypto space.

Some noted that the IMF’s framework fails to identify the potential benefits of cryptocurrencies and the blockchain technology, such as greater transparency. Besides, they also added that the framework fails to adequately address issues of crypto adoption in developing nations.

In recent ties, official at the IMF have been publicly discussing digital assets. Last year in 2022, IMF managing director Kristalina Georgieva categorized digital assets into three categories - central bank digital currency (CBDC), stablecoin and crypto assets without backing.

Back then, the IMF chief said that the major issue with CBDCs is “interoperability” among currencies of different countries. He also said that stablecoins and other digital assets lack regulations.

"So, my point here is that there are very important responsibilities for the central banks and also for other regulators — regulators of financial services, regulators of this asset class — to make sure that everybody can step into this world with some confidence," Georgieva said.