IMF calls for an end to the Wild West in crypto

Kristalina GeorgievaKristalina Georgieva

Kristalina Georgieva – Credit: Shutterstock

For the IMFit is important to regulate the crypto due to a risk for the financial stability. Kristalina Georgieva however, assures no desire to stifle l’innovation.

The FMIthrough its Managing Director Kristalina Georgieva, reiterates its call for regulation of the crypto-assets. The International Monetary Fund has already repeatedly called for a global framework to regulate these assets.

Kristalina Georgieva in her opening speech at the Seoul conference on digital currencies. And to justify it, she invoked a risk to the financial stability.

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The crypto Wild West not yet ancient history

The head of the IMF calls for “an end to the Wild West”. And according to her, this means framing cryptocurrencies and unleashing the potential of blockchain”. Kristalina Georgieva believes, however, that this Wild West is largely behind us.

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Last month’s condemnation of Binance, however, underlines that all is not yet settled in the sector. For the head of the IMF, the industry “has not built up a very glorious reputation over the last 15 years. And it’s not out of the woods yet.

Bankruptcies and scandals have had no impact on financial stability to date. For Kristalina Georgieva, however, a widespread use of crypto-assets and their repercussions should be anticipated.

Warning against cryptoization

In her opinion, “the scenario is anything but improbable”. In fact, she points out, “crypto has not disappeared, far from it”. And she cites Bitcoin, whose price has risen sharply this year. Crypto assets are of great interest to retail investors, notes Georgieva.

Even today, the keyword ‘Bitcoin’ comes up 20 times more often than ‘health and wellbeing’ and seven times more often than ‘climate change’ in Internet user searches”, she illustrates.

“The problem is that this strong adoption of cryptoactives could undermine macrofinancial stability,” the IMF official continues. Citing internal work, she warns that the ” cryptoization “is a risk.

Supplanting the national currency with a cryptoasset can compromise the transmission of monetary policy. What is the point, after all, of raising interest rates on a currency that few people hold?”

IMF recommendations on crypto

For the IMF, it is critical to improve the functioning of the financial system by introducing rules. These would aim to avoid the risks associated with cryptoactives and “an infrastructure leveraging some of their technologies”.

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To prevent the advent of a new Wild West, the IMF puts forward several recommendations. The main one is not to give cryptoactives legal tender status and not to make them official currencies.

The Fund also advocates a clarification of legislation, standards and regulations, as well as their systematic application, particularly those linked to the fight against money laundering and the financing of terrorism.

There is also a need for clear tax rules and a “solid legal foundation establishing a crystal-clear classification of crypto-assets”. Finally, the IMF calls on governments to coordinate their actions on a global scale to “avoid regulatory arbitrage”.

These rules are not intended to send us back to the world before cryptos, nor to stifle innovation. The crypto world is not entirely plagued by fraud, just as the Wild West is not all about bandits and their legendary prowess,” adds Kristalina Georgieva.

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