According to a recent report from the International Monetary Fund (IMF), cryptocurrencies have become more mainstream and are being used as a hedge against weaker currencies, speculative investments, and potential instruments for payments.
Therefore, the IMF said that a global response is needed to ensure comprehensive, consistent, and coordinated crypto regulation.
The International Monetary Fund (IMF) has a flagship magazine known as Finance & Development and its September edition had a report on cryptocurrency.
The report’s title shows that its focus is crypto regulation and coming up with rules that could provide a safe environment for innovation.
Aditya Narain, the deputy director of the Monetary and Capital Markets Department of the IMF, wrote the report, along with Marina Moretti, the assistant director.
The report said that crypto assets have existed for more than a decade, but regulation efforts have only recently moved to the top of the agenda.
Previously, cryptocurrencies were considered niche products that were looking for a purpose, but they have not garnered a more mainstream presence.
They are now being used for making speculative investments, as payment instruments, and also as a hedge against other currencies.
The authors said that the need for regulation has become urgent, given the failure of crypto hedge funds, exchanges, and issuers, along with a recent fall in the market’s valuation.
Crypto regulation challenges
The report also highlighted the challenges in crypto regulation. The two authors said that there are several reasons it is challenging to apply the existing framework for regulation to crypto or come up with new ones.
Moretti and Narain explained that the first issue is the rapid evolution of the crypto world.
It has become difficult for regulators to learn the necessary skills, or hire the talent for keeping up with the crypto market, considering the limited resources combined with other priorities.
Secondly, they explained that monitoring the crypto market is also complicated because patchy data is available and this makes it difficult for regulators to keep track of people.
It is also because these people are not subject to the typical reporting and disclosure requirements.
The IMF officials also noted that efforts were being made for developing crypto regulations on both the national and international levels.
They said that a regulatory fabric was currently being developed and a pattern would eventually emerge.
However, they said that the concern is that if it takes longer, then different regulatory frameworks would be developed by national authorities.
Thus, they elaborated that they were calling for a global response to crypto regulation that remains consistent, coordinated, and comprehensive.
They said that with a global regulatory framework in place, the market will be able to operate in an orderly manner.
Furthermore, it will also boost consumer confidence, outline what is permissible and ensure that innovation can continue in a safe space.
Crypto regulation has been a hot topic for quite a while, particularly in light of the crypto winter that has shown the need for protecting investors.