The International Monetary Fund (IMF) has called for coordinated and comprehensive global digital asset regulations, believing that digital assets could threaten financial stability and that these assets must not be granted legal tender status.
After convening earlier this month to discuss Bitcoin regulations, the organization revealed that the IMF Executive Board believes regulators must spring into action.
“Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn…Directors generally observed that while the supposed potential benefits from crypto assets have yet to materialize, significant risks have emerged,” the IMF board noted.
A paper outlining the board’s policy outlook made nine recommendations for regulators to base their policy on, all geared at limiting digital asset exposure to the mainstream financial system.
The IMF board warns that member nations must not grant legal tender status to digital assets to safeguard monetary sovereignty and enhance financial stability. This recommendation is consistent with the Washington-based organization’s outlook over the past few years. It has issued stern warnings to El Salvador and the Central African Republic, who have made BTC legal tender.
While it believes that outright bans may not be the best way to go, some of the directors of its board pointed out that such bans should not be entirely ruled out.
Other recommendations included defining a clear tax regime for digital assets, guarding against excessive capital flow volatility, international cooperation among regulators, and monitoring the impact of digital assets on the stability of the global monetary system.
Despite its stringent warnings, the IMF noted that digital assets and the underlying blockchain technology could greatly benefit if well regulated.
The IMF has been working with member nations to draft regulations for the digital asset industry. One of these efforts is with India, where it has partnered with the government and the Financial Stability Board on the initiative.
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