The International Monetary Fund (IMF) has revealed its stance on digital assets, stating that it prefers to regulate the world of digital money rather than impose a complete ban. During an interview on the sidelines of the G20 finance ministers meetings in Bengaluru, IMF Managing Director Kristalina Georgieva explained the agency’s position and what it would like to see in terms of regulation.
Georgieva emphasized that regulating crypto assets is a top priority for the IMF, saying, “We are very much in favor of regulating the world of digital money.” She also noted that differentiating between central bank digital currencies (CBDCs) and publically issued crypto assets and stablecoins is their first objective. Georgieva highlighted that fully-backed stablecoins create a “reasonably good space for the economy,” while non-backed crypto assets are speculative, high risk, and not money.
The IMF’s Managing Director also warned that the option to ban cryptocurrencies should not be taken off the table, although good regulations, predictability, and consumer protection should be the first option. She stated that banning would only be considered if crypto assets began to pose a greater risk to financial stability. Georgieva further explained that an inability to protect consumers from the rapidly evolving world of crypto assets would be the primary catalyst for such a decision.
Citing a recent paper recommending global regulation standards, she said that crypto assets cannot be legal tender because they are not backed. Nevertheless, the IMF, the Financial Stability Board (FSB), and the Bank for International Settlements (BIS) are jointly preparing regulatory framework guidelines to be released in the second half of the year.
Georgieva’s remarks on regulating rather than banning digital assets align with the IMF’s previous position on cryptocurrencies. The agency has previously stated that it sees digital assets as a potential complement to traditional currencies, but also recognized the need for regulation to prevent financial crime and protect consumers.
The IMF’s collaboration with the FSB and the BIS to develop regulatory framework guidelines indicates the growing need for clear rules and standards governing the use of digital assets. The FSB has previously expressed concerns about the potential risks associated with cryptocurrencies and called for international cooperation to develop a regulatory framework.
As the digital asset market continues to evolve, regulators are under pressure to develop clear guidelines to protect investors and prevent financial crime. The IMF’s preference for regulation rather than an outright ban suggests that policymakers are willing to strike a balance between innovation and consumer protection.