The cryptocurrency boom witnessed in the last couple of years has sprung many countries into action over regulating the digital industry. Naturally, their regulatory approaches have varied based on factors relating to their individual economies. The International Monetary Fund, however, is firming its insistence on adopting a global regulatory framework instead.
IMF’s chief economist Gita Gopinath recently pitched for a global policy framework for the digital assets industry. Thus, noting that “no individual country can solve this problem on their own” due to the ease with which cryptocurrencies can be transacted offshore. “There is a need for a global policy on it urgently,” she added.
The economist, while addressing an event organized by India’s National Council of Applied Economic Research (NCAER), argued that cryptocurrencies pose a greater challenge to emerging economies. Thus, stating,
“It would seem that cryptocurrencies are more attractive for emerging markets compared to developed economies. However, emerging markets have exchange rate controls, capital flow controls, and cryptocurrencies can impact that.”
Albeit, Gopinath did acknowledge the practical obstacles that emerge from banning cryptocurrencies due to their decentralization. She instead insisted on the important need to regulate them. Notably, Gopinath also added that the laws governing them should be similar to those applying to other financial investment assets.
The decentralization of crypto assets is another aspect that calls for a global policy approach according to Gopinath, who said,
“There are challenges to banning it whether you can end up with truly banning crypto because many exchanges are offshore and they are not subject to regulations of a particular country.”
Take for example Binance, which is one of the largest centralized crypto exchanges and yet continues to operate without any physical headquarters around the globe. This has landed the company in trouble in numerous countries, which had either banned or warned the exchange into becoming compliant, showcasing an almost concerted effort at containing Binance.
Gopinath’s comments have come just days after the IMF released a detailed blog endorsing a globally “comprehensive, consistent and coordinated” approach to crypto regulation.
The core elements of this framework would include authorization of crypto-asset service providers, establishing requirements for crypto brokers and products similar to traditional markets. It would also include clear requirements for regulated financial institutions with crypto exposure.