Global financial regulators and the IMF unveiled a plan to coordinate actions aimed at safeguarding macroeconomic and financial stability from the risks posed by cryptocurrencies. They emphasized that noncompliance with existing laws worsens these risks. While cryptocurrencies promised benefits like quicker cross-border payments and improved financial inclusion, these advantages have yet to materialize.
The paper warns that widespread crypto adoption could disrupt monetary policy effectiveness, bypass capital flow controls, heighten fiscal risks, divert resources from the real economy, and endanger global financial stability. It establishes timelines for IMF and G20 members to adopt recent recommendations for crypto regulation from the Financial Stability Board and IOSCO, a global group of securities regulators.
This marks a shift in regulatory outlook, which previously downplayed crypto risks. However, the collapse of the FTX crypto exchange in November, causing market turmoil and investor losses, prompted a reevaluation.
The paper asserts that a comprehensive policy and regulatory response is crucial to address crypto risks to macroeconomic and financial stability. The EU has approved pioneering crypto regulations, but other regions have varying approaches to this borderless sector plagued by fraud and manipulation.
Additionally, governments should avoid large deficits to prevent inflation that undermines traditional currencies and encourages crypto alternatives. Clarity regarding the tax treatment of crypto assets and their adherence to existing laws is also essential.
By FCCT Editorial Team
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