Global financial regulators, along with the International Monetary Fund (IMF), have announced a roadmap to coordinate efforts aimed at mitigating the risks associated with cryptocurrencies, as these assets have the potential to undermine macroeconomic and financial stability. The Financial Stability Board (FSB) and IMF pointed out that these risks are compounded by noncompliance with existing regulations in some instances. While cryptocurrencies promise benefits such as cheaper and faster cross-border payments and enhanced financial inclusion, many of these advantages have yet to materialize.
The widespread adoption of cryptocurrencies could negatively impact monetary policy effectiveness, bypass capital flow management measures, heighten fiscal risks, divert resources from the real economy, and threaten global financial stability, according to the joint paper. The roadmap outlines timelines for IMF and G20 members to implement recent recommendations on cryptocurrency regulation from the FSB and the International Organization of Securities Commissions (IOSCO), a global association of securities regulators.
This announcement represents an evolution in regulatory thinking, especially in the wake of the collapse of cryptocurrency exchange FTX in November, which shook markets and resulted in investor losses. The paper underscores the necessity of a comprehensive policy and regulatory response to address cryptocurrency risks to macroeconomic and financial stability.
The European Union has already approved the world’s first comprehensive set of rules for cryptocurrencies, while other regions take varying approaches to the sector. The paper suggests that governments avoid large deficits that can lead to inflation, potentially driving demand for cryptocurrencies. Additionally, it emphasizes the importance of clarifying the tax treatment of cryptocurrencies and how existing laws apply to this rapidly evolving sector.
