In recent years, crypto assets have transitioned from niche products to more mainstream, according to a new report by the International Monetary Fund (IMF). Hence, there is a need for authorities to develop more detailed policies to regulate the industry.
The report’s co-authors, Aditya Narain (IMF capital markets director) and his assistant, Marina Moretti, remarked that crypto assets are now useful as payment instruments, speculative investments, and hedges against weak currencies. The authors also noted that the recent failures of virtual asset providers (crypto exchanges, issuers, and hedge funds) are the necessary push for regulators to establish relevant crypto policies.
The failures of crypto issuers, exchanges and hedge funds have added impetus to the push to regulate these digital assets. Read more in F&D. https://t.co/Vfyr4uN6NY pic.twitter.com/4LF9P3DZpc
— IMF (@IMFNews) September 5, 2022
However, Narain and Moretti note that various obstacles make it difficult for regulators to create appropriate crypto regulations. Such obstacles include regulators’ lack of workable skills, the market’s rapid evolution, and the struggle to monitor the market’s activities.
Regulators have several priorities, and their resources are stretched thin. Hence, they are having difficulty learning the skills and talent to keep pace with the evolution in the industry.
The report also challenges various regulators to adopt a consistent and coordinated approach to crypto regulation. Thus, there can be a uniform regulatory framework for cryptos globally.
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The authors explained that various aspects of crypto regulation are not covered by traditional financial regulation. Thus, they suggest that regulators split the creation of the policies among themselves. Then, the regulators can combine the policies into one comprehensive global crypto policy.
Some can focus on the crypto actors, such as protocol developers, miners, and validators. Others can focus on consumer protection, safety, or financial integrity. “A global comprehensive crypto regulation offers various benefits to the crypto market. There will be order in the markets, higher consumer confidence, limits on what is permissible, and a conducive environment for innovation to thrive.”
Global financial regulators have held various meetings on the best ways to regulate the crypto market. Europe plans to release the final draft of its highly expected Markets in Crypto Assets (MiCA) crypto policy within the next six weeks.
A Bill known as the “responsible financial innovation act” is United States’ solution to the biggest questions about the crypto industry. Even anti-crypto lawmakers who had always advocated for a blanket ban on crypto now support the idea of regulating the market and not banning it outrightly.
US Congressman, Brad Sherman, is the latest anti-crypto lawmaker to change his stance from a total ban on crypto to the regulation of the sector. Sherman believes the industry has grown to have so much money and influence that an outright ban is impossible. It will be in the best interest of all crypto players, investors, and regulators if the regulators consider the IMF’s suggestions in this report.
Paul is a cryptocurrency enthusiast from Canada, and since 2021 he has been writing about cryptocurrency for online news portals. He writes mostly news-related articles. Stay tuned to his posts to stay up to date with the crypto world.
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