IMF To Develop Global Regulations For Crypto Currencies

The patronage for crypto currencies has become a key concern for the International Monetary Fund which now believes that the blockchain may damage the conventional financial system.

The IMF revealed in a document posted on its website that soon, countries will begin to witness a situation where cryptos will replace domestic currencies.

This will affect emerging markets and developing economies like Nigeria who will face more immediate and acute risks of currency substitution through crypto assets.

Many countries like Nigeria, Bolivia, Turkey, Egypt and Indonesia have banned crypto currencies from the banking channels, while China has been brutal with its restrictions.

The global financial regulator disclosed that the currency has risen to $2.5trn.

According to the IMF, the amount may have resulted from an environment of stretched valuations.

IMF believes that determining the valuation of crypto assets is not the only challenge in the crypto ecosystem.

“Moreover, in emerging markets and developing economies, the advent of crypto can accelerate what we have called ‘cryptoization’—when these assets replace domestic currency, and circumvent exchange restrictions and capital account management measures,” the IMF noted.

The Washington based lender said such risks underscore the need for comprehensive international standards to fully address risks to the financial system from crypto assets.

The standards would also deal with their associated ecosystem, and their related transactions, while allowing for an enabling environment for useful crypto asset products and applications.

IMF added, “The Financial Stability Board, in its coordinating role, should develop a global framework comprising standards for regulation of crypto assets.

“The objective should be to provide a comprehensive and coordinated approach to managing risks to financial stability and market conduct that can be consistently applied across jurisdictions, while minimizing the potential for regulatory arbitrage, or moving activity to jurisdictions with easier requirements.”

The IMF said the Financial Stability Board will ensure as part of the standard that crypto-asset service providers that deliver critical functions should be licensed or authorized.