Tuesday, January 18

IMF signals rise in cryptocurrency connections and regulated finance


The International Monetary Fund (IMF) has noted the increase in interconnections between cryptocurrencies and the regulated financial system. In a post by blog Signed by Tobias Adrian, Dong He, and Aditya Narain, the IMF underscores the growth of crypto assets and the products and services associated with them. The body specifies that a large part of the activities of the crypto sector lack regulation and urges a “comprehensive, coherent and coordinated global regulation.” The Fund ensures that there is an urgent need for cross-border collaboration and cooperation. “Crypto assets are changing the international monetary and financial system in profound ways,” he says.

IMF and cryptocurrencies

The IMF explains that in emerging markets and developing economies, crypto can accelerate “cryptoization.” This phenomenon, he explains, occurs when these assets replace the national currency and bypass exchange restrictions and capital account management measures. Therefore, it indicates that comprehensive international standards are needed to address the risks to the financial system of crypto assets.

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The Fund refers to the different guidelines issued by different international organizations and claims that, although they are useful, they are not sufficiently coordinated. IMF refers to the almost 2.5 trillion market capitalization of cryptocurrencies. However, it points out that this amount could be the reflection of the foam of stretched valuations. In this sense, he cites that the first reactions to the Omicron variant resulted in a massive sale of cryptocurrencies.

Rules similar to banking

The international body specifies that the global regulatory framework should provide a level playing field across the spectrum of activities and risks. Crypto asset service providers offering critical functions must be licensed or authorized, it says. “They would include storage, transfer, liquidation and custody of reserves and assets, among others, similar to the existing rules for providers of financial services.” It also indicates that the requirements must be adapted to the main use cases for cryptoassets and stablecoins.

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“For example, investment products and services should have requirements similar to those of securities brokers and dealers, supervised by the securities regulator. The services and products for Payments They should have requirements similar to those for bank deposits, supervised by the central bank or the payments supervisory authority. Regardless of the initial authority to approve crypto products and services, all supervisors, from central banks to securities and banking regulators, must coordinate to address the various risks that arise from different and changing uses.

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Clear rules

The IMF specifies that the authorities must provide clear requirements to regulated financial institutions regarding their exposure and commitment to cryptocurrencies.

“Appropriate banking, securities, insurance and pension regulators should stipulate capital and liquidity requirements. As well as the exposure limits to different types of these assets, and require risk and suitability assessments from investors. If regulated entities provide custodial services, the requirements need to be clarified to address the risks arising from those functions. ‘

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