Highlighting that widespread adoption of crypto assets could undermine the effectiveness of monetary policy, the joint synthesis paper by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) has however, said that a blanket ban may not be effective.
“Widespread adoption of crypto-assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability. These risks could reinforce each other, as financial instability can make maintaining price stability more difficult and vice versa; cause destabilising financial flows; and strain fiscal resources,” said the paper released on Thursday.
The paper is the first ever attempt at a global framework for cryptocurrencies and will be submitted to G20 members ahead of the Leaders' Summit on September 9 and 10. There is expectation of growing consensus on a common regulatory framework at the meeting. The Indian G20 Presidency had requested both the IMF and the FSB to draft this joint paper for policy recommendations and standards to help authorities address the macroeconomic and financial stability risks posed by crypto-assets.
The paper has also highlighted that the use of crypto assets as a means of cross border payments has created challenges for regulators. "The growing presence of new forms of crypto-assets used as a means of payment poses various potential challenges for data collection and analysis such as cross-border usage and currency substitution. Rapid cryptoisation can have an impact on the monetary independence and financial stability of economies,” it has said, while noting that the data to measure crypto-assets, and their impact are scarce.
Blanket bans that make all crypto-asset activities such as trading and mining illegal can be costly and technically demanding to enforce, it has also cautioned. “They also tend to increase the incentives for circumvention due to the inherent borderless nature of crypto- assets, resulting in potentially heightened financial integrity risks, and can also create inefficiencies," the paper read.
It further added, "A decision to ban is not an 'easy option' and should be informed by an assessment of money laundering and terrorist financing risks and other considerations, such as large capital outflows and other public policy aims."
Instead, it has called for a comprehensive policy and regulatory response for crypto-assets to address the risks of crypto-assets to macroeconomic and financial stability. However, regulation and supervision of licensed or registered crypto-asset issuers and service providers can support the functioning of capital flow measures, fiscal and tax policies, and financial integrity requirements, it has said.
To curb misuse of these assets, the paper has also said that jurisdictions should implement the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing standards that apply to virtual assets and virtual asset service providers.
The joint paper noted that discussions within G20 could help statistical agencies and regulatory bodies when it comes to data requirements around cryptocurrencies.
"These discussions within the G20 could also facilitate collaboration of statistical agencies with regulatory bodies to influence regulations regarding data requirements for cryptoassets," the paper read.
IMF and FSB have submited a joint paper on crypto to G20 members 
Special 
