- L Hickey and M Bacina
IMF Executive call for co-ordinated crypto policies
On 23 February 2023, the International Monetary Fund (IMF) announced the outcome of a conference held by its executive board of directors via a paper titled ‘Elements of Effective Policies for Crypto Assets.’ This development provides guidance for member countries around the development of effective crypto policies and regulations to:
better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation...[with the IMF aiming to help] members develop a comprehensive, consistent, and coordinated policy response.
According to the IMF, the one aspect of the regulatory framework aims to safeguard monetary sovereignty and stability through stronger frameworks which do not allow crypto-assets to have official currency or legal tender status. According to the IMF:
by adopting the framework, policymakers can better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation associated with it.
The IMF states that the regulatory framework will address excessive capital flow volatility through the use of an unambiguous tax treatment of crypto-assets and through enforcing:
prudential, conduct, and oversight requirements to all crypto market actors.
The IMF broadly agreed that there is a need to develop and apply comprehensive regulations and effective implementation of the Financial Action Task Force standards. The IMF has detailed that the regulatory framework establishes:
a joint monitoring framework across different domestic agencies and authorities [and] international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations.
The IMF focused on the importance of promoting the principle of ‘same activity, same risk, same regulation.’ The directors put forth that:
strong coordination between authorities, both at the domestic and international levels, is critical for consistent implementation and avoiding regulatory arbitrage. [The IMF] could serve as a thought leader in further analytical work on rapidly evolving developments in crypto assets.
Co-ordinated regulation will be difficult in the current environment as some jurisdictions seek to attract crypto-asset businesses, and some are following a "regulation by enforcement" approach.