The International Monetary Fund (IMF) has suggested coordinated action for putting global standards in place to manage the risks that come along with cryptocurrency adoption. The risks, according to the IMF, are greater for developing and emerging countries.
In a blog, IMF said that the challenges posed by the crypto ecosystem include determining valuation along with identifying, managing, and monitoring risks. Investor protection, inaccurate disclosure, and inadequate reserves are among some of the other challenges highlighted by the IMF.
The blog also touched on ‘cryptonization’, which is a trend that involves replacing domestic currency with digital assets – a growing problem across developing nations. Cryptoization brings along with it risks associated with the circumvention of exchange restrictions and measures for capital account management.
Some fine-tuning is also needed in capital flow management, according to the IMF. The blog also highlighted the ineffectiveness of national approaches in the face of crypto’s cross-border and cross-sector remit. It stated that supervising and enforcing rules and regulations on crypto service providers are difficult processes due to their cross-border operations. If regulatory measures are not coordinated, capital flows may be destabilized.
The authors of the blog stressed the need for licensing crypto service providers based on the rules and regulations that financial services players have to adhere to. Two rule sets have been proposed by the authors. While one will have requirements like securities, the other will be applied in situations where the government permits cryptocurrency use for payments.
It’s quite clear from this IMF blog that there’s a lot of concern surrounding the growth of the global crypto market.