The International Monetary Fund (IMF) and the Financial Stability Board (FSB) have teamed up to release a joint policy paper. This paper was requested by the Indian G20 Presidency and is a major step towards global cryptocurrency regulation. Its main goal is to provide guidance to different countries on how to handle the risks linked to crypto assets like stablecoins and decentralized finance (DeFi).
The report highlights a key concern about stablecoins, which are intended to keep their value stable but could unexpectedly become unstable, creating a potential threat to the stability of the financial system. When it comes to DeFi (Decentralized Finance), the paper suggests that despite some unique features, DeFi functions aren't fundamentally different from traditional financial systems. It cautions that if DeFi tries to copy traditional financial processes too closely, it might face similar risks, like problems with available funds and investment time frames not aligning properly.
The IMF-FSB paper confirms the IMF's previous position that a complete ban on crypto isn't the best long-term solution. Back on June 22, the IMF recommended that countries should concentrate on boosting the popularity of cryptocurrencies by meeting the digital payment requirements of consumers. This paper is set to be presented to the G20 later this week, marking a significant move in global attempts to set worldwide guidelines for cryptocurrencies.
Since taking on the G20 Presidency, India has been leading the charge in encouraging member nations to work together on establishing a global framework for cryptocurrencies. India has even released its own guidance on crypto regulation during its Presidency. Recent developments, such as the release of the IMF-FSB synthesis paper, suggest that India is making progress in its efforts to bring about a Global Crypto Framework.
The partnership between the IMF, FSB, and the Indian G20 Presidency is a significant step in how the world deals with regulating cryptocurrencies. It shows that countries recognize the importance of working together to handle the challenges and benefits of the growing crypto market.
