The International Monetary Fund would rather distinguish between and regulate crypto assets than outright prohibit them, but for the time being, the nuclear option will still be available.
IMF Managing Director Kristalina Georgieva discussed how the United Nations financial agency views digital assets and what it would want to see in terms of regulation during a speech on the sidelines of the G20 finance ministers meetings in Bengaluru, India.
That is a high priority, she said, and “we are very much in favor of regulating the realm of digital money.”
She responded to a query regarding her most recent remarks regarding a potential total ban on cryptocurrencies during an interview with Bloomberg that was released on February 27. She claimed that there was still a lot of uncertainty regarding the categorisation of digital currency.
“Our initial goal is to distinguish between publicly issued crypto assets and stablecoins and central bank digital currencies that are backed by the state.”
Stablecoins that are fully backed make the economy “pretty good space,” while unbacked crypto assets are speculative, high risk, and not legal tender, she continued.
She stated that cryptocurrency assets cannot be considered legal cash because they are not supported, citing a recent research that suggested international regulating norms.
She cautioned that if cryptocurrencies start to pose a greater risk to financial stability, the option to outlaw them “should not be taken off the table.”However, Georgieva argued that solid controls, predictability, and consumer protection would be preferable and that banning would not be necessary.
When asked what would lead to the decision to outlaw cryptocurrencies, she responded that the main driver would be the incapacity to safeguard consumers from the quickly developing world of crypto assets.
The second part of the year will see the release of regulatory framework recommendations that are being jointly developed by the IMF, the Financial Stability Board, and the Bank for International Settlements (BIS).
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