IMF Calls for International Cooperation on Cryptocurrency Regulation

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by Bhushan Akolkar · 3 min read
IMF Calls for International Cooperation on Cryptocurrency Regulation
Photo: World Bank Photo Collection / Flickr

IMF has also cautioned against the associated ‘risks’ with the growing prices of cryptocurrencies and asks countries to have a unanimous policy framework.

The unprecedented growth and popularity of virtual digital currencies have swept across the global economies. Everyone, including retail investors and big financial institutions at this point, is closely observing the crypto market and its momentum. Previously, a few analysts have also predicted that cryptocurrencies will emerge as the new asset class in future but it currently seems too unlikely to happen, looking at the extreme volatility the exhibit.

Moreover, with the growing popularity of cryptocurrencies, different government bodies across the globe are seen taking a different stand in its operation, and so, there is yet no clarity about how the global economy sees it unanimously. United Nations organization – International Monetary Fund (IMF) – which looks after the global financial stability and monetary cooperation has sought for global coordination and cooperation on cryptocurrencies while warning the ‘risks’ associated with the surging price of digital currencies.

As per the latest report from Bloomberg, IMF spokesman Gerry Rice last week stated that “greater international discussion and cooperation among regulators, yes, would be helpful.” Rice further added “When asset prices go up quickly, risks can accumulate, particularly if market participants are borrowing money to buy. It’s important for people to be aware of the risks and take the necessary risk-management measures.”

Rice also stated that the dangers posed by investing in cryptocurrency outweigh their potential benefits of establishing an efficient payment system. He said, “Cryptocurrencies can pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud.”

Note that IMF is not the first global financial institutions to voice this opinion. Along similar lines, Treasury Secretary Steven Mnuchin said that powerful economies should come together in order to prevent the birth of digital equivalent of anonymous Swiss bank accounts. It must be ensured that “bad people cannot use these currencies to do bad things.”

With the growing popularity of cryptos, IMF has maintained a nuanced approach while dealing and discussing cryptocurrencies and their inclusion within the financial system by major considering developing and under-developed countries of the globe. Exactly a year back, at the World Economic Forum, IMF chief and managing director Christine Lagarde presented a report titled “Virtual Currencies and Beyond: Initial Considerations”. A summary of the report reads ‘virtual currencies and their underlying technologies can provide faster and cheaper financial services and can become a powerful tool for deepening financial inclusion in the developing world.’

However, later that year in September 2017, stated that cryptocurrencies could emerge as a major reason of concern and headache for countries and its central banks. Lagarde said “Not so long ago, some experts argued that personal computers would never be adopted and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.”

The was exactly at the time when the crypto markets were quite a lot heated due to the strict regulatory measures and trading ban introduced by China.

At this time, things are not absolutely clear as to how exactly IMF plans to bring the countries together. Possibly, at the ongoing World Economic Forum 2018, we can see countries and other global financial institutions having a detailed discussion on it.

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