Crypto assets pose risks to financial system, close monitoring is needed: IMF

Amid the euphoria over cryptocurrencies, the International Monetary Fund (IMF) has said that crypto assets present risks to different aspects of the financial system, and also called for closely monitoring the financial stability risks posed by them.

Responding to a question about media reports that the Indian government may bar the use of crypto assets for transactions, but regulate them for holding them, IMF spokesman Gerry Rice said the global body believes that crypto assets present risks to different aspects of the financial system, including its operational stability, financial integrity, investor protection, and environmental aspects.

"Thus far, the IMF hasn't found financial stability risks to be systemic at the global level, but risks are building up and should be closely monitored," Rice said during a press briefing.

The policymakers should monitor the rapidly evolving crypto landscape by developing data standards and reinforcing reporting requirements, he added.

Also Read: Banning crypto not the solution, but need progressive, pro-innovation-led regulation: Amitabh Kant

"So again, we've said all this in terms of a general stance on this issue. National regulators should prioritise the implementation of these global standards, and by that, I'm referring to standards that have been set by the Financial Action Task Force and the Financial Stability Board, and where standards have not yet been developed, regulators must rely on and complement existing tools to control risks, especially in wallets and exchanges and financial institutions exposures," Rice said.

The regulators should also enhance cross-border coordination of supervision and enforcement actions given the cross-border dimension of crypto assets, he said, adding that international coordination is key to prevent and minimise potential leakages of domestic policies and cross-border regulatory arbitrage.

Opinions are divided about regulating crypto assets in India. The government is expected to take a comprehensive bill on cryptocurrencies for Cabinet clearance to table it during the winter session of Parliament, beginning November 29. However, the RBI has been a staunch opponent of the asset class.

Last week, RBI Governor Shaktikanta Das reiterated the central bank has serious concerns about macroeconomic and financial stability due to cryptocurrencies, and called for "deeper, well-informed" discussions on the issue.

Earlier this month, Prime Minister Narendra Modi chaired a high-level meeting on cryptocurrencies and other related issues. Later, he also urged cooperation between the world's democracies to ensure cryptocurrencies like Bitcoin do not "end up in the wrong hands".

Also Read: RBI Governor calls for 'deeper, well-informed' discussion on cryptocurrencies