A report from two organizations, the IMF and the G20’s Financial Stability Board, was requested by the Indian G20 Presidency. It warns against completely banning cryptocurrencies to manage the risks they pose. Instead, it suggests using targeted restrictions and good financial policies.
The report is concerned about how cryptocurrencies could affect a country’s money policies. It recommends giving licenses to companies that offer crypto services and following the Financial Action Task Force’s anti-money laundering and counter-terrorist financing rules in the crypto sector. It also says that banning cryptocurrencies completely might not work because they are not tied to any specific country.
These recommendations offer advice to governments on how to deal with the risks of crypto assets and markets, including stablecoins and decentralized finance (DeFi).
Cryptocurrencies have been around for over a decade and have shown a lot of ups and downs. They started in 2009, right after the Global Financial Crisis. Their value has gone up and down a lot, like in 2021 when their total value increased a lot and then dropped sharply in 2022, going from $2.6 trillion to less than $1 trillion.
The paper advises that to safeguard the stability of money, cryptocurrencies should not be given the status of official currency or legal tender. It also cautions central banks against including cryptocurrencies in their official reserve assets because they could pose risks to the global monetary system. When governments use cryptocurrencies, they should take steps to minimize financial and operational risks.
Furthermore, tax policies should be clear about how cryptocurrencies are taxed, and tax authorities should make sure people comply with these rules.
The International Monetary Fund is focusing on understanding the potential financial and spillover risks that cryptocurrencies could have on the global monetary system.
India will discuss these recommendations with the G20 leaders during their summit to seek consensus on them.
The joint paper explains how the policies and regulations developed by the IMF and the FSB work together, but it doesn’t introduce any new rules or suggestions.
In July, the FSB recommended that regulatory authorities should have enough authority to oversee and manage crypto activities and markets. However, the Reserve Bank of India has been in favor of banning cryptocurrencies because they believe these digital assets could harm the stability of the financial system.
The paper also includes a plan for putting these crypto-asset policies into action. By the end of 2025, there will be detailed information about how cryptocurrencies are used for payments. The IMF is responsible for collecting this data. India has stressed the importance of having this data before creating any laws to regulate cryptocurrencies.
The IMF and World Bank will work together to create a complete set of guidelines for cryptocurrencies as part of their support and training efforts over the next 8-12 months. They will also provide assistance, advice, and training to countries that are struggling to put these guidelines into practice.
Additionally, the FATF (Financial Action Task Force) will offer support, guidance, and training to countries where the implementation of cryptocurrency rules is falling behind. They will publicly announce the actions taken by these countries to follow the cryptocurrency standards, especially in places where crypto activity is significant.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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