The opposition between traditional financial institutions and the crypto industry is in full swing. Certainly, the International Monetary Fund (IMF) has recently recognized the advantages of cryptos, however it still demands their regulation. The rapid development of digital currencies is seen as a danger to global financial stability. The recent failures of players in the crypto industry would be, according to the IMF, a sign that strict and coordinated regulation on a global scale is essential. By publishing a new report, the IMF demonstrates its desire to regulate the purchase and exploitation of virtual currencies.
IMF pushes for large-scale crypto regulation
As part of his Flagship magazine Finance and Development of september, the International Monetary Fund released a new report. In this document, it returned to the need to regulate the cryptocurrency sector. Anditya Narain and Marina Morettirespectively Director and Deputy Director of Capital Markets at the IMF, are the authors of this report entitled Regulating Crypto: The Right Rules Could Provide a Safe Space for Innovation.
The authors draw the attention of regulators to the change in the status of cryptocurrencies. These are no longer niche products like 10 years ago. Their adoption is more common and therefore control measures should be taken in parallel. The two authors believe that the recent difficulties for cryptos are a sign that the time has come for regulators to take coordinated action on a global scale.
Finally, the two IMF officials also recognize the passivity of the regulators. Indeed, these would have underestimated the potential of cryptocurrencies since their creation in 2009. They also admit that the disproportionate growth of digital currencies could eventually cause sectoral shocks. If such a thing were to happen, the global financial stability could take a hit.
To justify his wish to rregulate the crypto market, the IMF points the finger at cybercrime and the piracy of funds of which companies and individuals are victims. He believes that stricter regulation would secure investors and their investments.
Finally a recognition of cryptos?
The new report published by the IMF shows once again that the cryptocurrency industry is a real thorn under the institution’s foot. Indeed, for decades, the institution dictated its law in the context of state funding. However, the democratization of virtual currencies has eroded its hegemony, which is unacceptable. To regain control, the institution generally rewards countries that are closed to cryptos with big money loans.
On the other hand, governments favorable to the adoption of cryptos are seen with a bad eye. In extreme cases, they may write off promises of IMF financing. El Salvador is the most tangible example of this modus operandi. He was denied financial aid because of the adoption in 2021 of Bitcoin (BTC) as the national currency. Furthermore, the IMF seems open to cryptocurrencies, provided that they agree to be under the control of financial institutions. There is no recognition of cryptos yet, but the institution cannot deny some of their technological and innovation advantages.
In the end, the logic of the IMF is clear, cryptocurrencies must be regulated to prevent them from spiraling out of control. The institution recognizes that only joint action by governments and regulators can achieve a satisfactory result. In the meantime, despite the difficulties encountered, cryptocurrencies continue to establish themselves as a credible alternative to traditional currencies, no offense to its opponents.
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