In Lieu Of Explicit Bans, IMF Prefers More Crypto Regulations

March 2, 2023

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The managing director of the International Monetary Fund, Kristalina Georgieva, has delivered a speech on the sidelines of a meeting of the G20 finance ministers in Bengaluru, India, to clarify the way the UN’s financial agency views digital assets and its regulatory preferences.

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During the discussion, she expressed her support for the regulation of digital money and said that this was a top priority for the government.

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She has recently been quoted by Trade Algo in an interview regarding her recent comments regarding the possibility of a total ban on cryptos during the first week of February. According to her, there is still a great deal of ambiguity regarding the classification of digital currencies.

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“Our first objective is to differentiate between central bank digital currencies that are backed by the state and publically issued crypto assets and stablecoins.”

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Stablecoins that are fully backed by the government provide a reasonably stable space for the economy, while crypto assets that are not backed by the government are speculative, high-risk, and not money. To support her argument that crypto assets cannot be used as legal tender, she cited a recent paper that recommended global regulatory standards for these assets.

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As she cautioned, banning cryptocurrencies should be considered in the event that they become a more significant threat to financial stability in the future. However, if an outright ban were to be implemented, it would be better than the alternatives such as effective regulation, predictability, and consumer protection.

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According to her, the primary driver of the decision to ban crypto assets was the fact that consumers could not be protected from the rapidly evolving world of crypto assets due to the inability to safeguard them.

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There will be a series of guidelines on regulatory frameworks to be disseminated by the International Monetary Fund, the Financial Stability Board, and the Bank for International Settlements at the end of the year.