Regulate cryptocurrencies; don't ban them, says IMF's Gita Gopinath

Developing economies should regulate cryptocurrencies rather than banning them, International Monetary Fund (IMF) chief economist Gita Gopinath said on Wednesday. 

Speaking at an event organised by the National Council of Applied Economic Research (NCAER), Gopinath called for an urgent global policy on the issue. 

She added that cryptos are proving to be a challenge for the emerging markets and that stringent regulation is the need of the hour. 

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Gopinath, however, added that there were practical handicaps to banning the digital currencies, given their decentralised nature. 

"Regulating crypto assets and currencies is essential, especially for emerging and developing economies, as banning them may not work as crypto exchanges are located offshore, which makes it easier for an individual to trade in them despite the ban," the IMF chief economist said during a lecture on 'Global Recovery and Policy Challenges in 2022' organised by the NCAER. 

Gopinath stated that no individual country could resolve this problem on its own considering the knotty cross-border transactions, adding that "there is a need for a global policy on it urgently." 

She also cautioned that the adoption of cryptocurrencies presents a challenge for the emerging economies as the majority of them typically had regulations around overseas transactions. 

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"Cryptos pose problems as usually emerging developing economies have exchange rate controls, capital controls, and capital flow measures…, crypto assets and currencies can be used to evade those regulations," Gopinath noted. 

Her comments come at a time when the government is mulling to bring a Bill on cryptocurrency regulation. 

However, with the Union Cabinet not taking up the Bill for consideration on Wednesday and the Winter Session of Parliament ending on December 23, the chances of it being tabled in the House seem slim. 

Gopinath, who will take charge as the first deputy managing director of the IMF on January 21, 2022, also called on Prime Minister Narendra Modi on Wednesday.