• International Monetary Fund (IMF) has made recommendations to regulate the cryptosphere and provide a framework for exchanges and investors to work to.
• Entities that carry out many different functions in the cryptosphere should be subject top additional oversight.
• Established financial institutions that deal in cryptocurrencies should be subject to clear requirements regarding the risks that arise from transacting in crypto.
The International Monetary Fund (IMF) has recently announced its 5-point plan for the regulation of the cryptocurrency industry. The plan is designed to provide a framework for exchanges and investors to work within, and consists of a comprehensive set of recommendations for the regulation of the cryptosphere.
Firstly, the IMF is calling for crypto asset service providers to be licensed, registered, and authorized. This includes those providing storage, transfer, exchange, settlement, and custody services, and would be subject to the same rules and regulations that govern providers of services in the traditional financial sector. It is also calling for customer assets to be held separately from the company’s own assets and for the responsible authority to be clearly defined.
The second recommendation is that entities that carry out many different functions in the cryptosphere should be subject to additional oversight. If there is any conflict of interest, it should be assessed by the responsible authority and prohibited, if necessary. These entities should also be subject to stringent regulations on transparency, so that all dependencies and operations can be clearly identified.
Thirdly, the IMF is calling for stablecoin issuers to be subject to strict prudential requirements. Stablecoins are becoming increasingly popular as a store of value for investors, and without proper oversight and regulation, such holdings could destabilise monetary and financial stability. In cases of major stablecoins, the IMF is recommending that the same level of regulation that is employed in the banking sector is put in place.
Fourthly, the IMF is recommending that established financial institutions that deal in cryptocurrencies should be subject to clear requirements regarding the risks that arise from transacting in crypto. These requirements should be tailored to the nature of the cryptocurrency being traded, and should be based on the institution’s risk profile.
Finally, the IMF is calling for a robust, global crypto regulation and supervision framework. With its borderless nature, the digital coins have highlighted the ineffectiveness of national authorities to adequately deal with them, and only a unified approach that can adapt to the ever-changing landscape of the cryptocurrency industry can be effective.
Overall, the IMF’s 5-point plan for the regulation of the cryptocurrency industry is an important step in the right direction, and could provide the framework needed to ensure the safety and security of the cryptosphere. If implemented correctly, it could provide investors and exchanges with the assurance they need to confidently operate in the industry.