I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. Today I will be looking at a recent press release from the International Monetary Fund (IMF) in which their Executive Board reviewed a board paper on Elements of Effective Policies for Crypto Assets. The paper looked at questions from Fund members regarding how they should respond to the rise of crypto assets and their associated risks. The paper defined crypto assets based on their underlying features and also looked at their purported benefits and potential risks.
Elements of Effective Policies for Crypto Assets
Back on the 8th of February 2023 the Executive Board of the International Monetary Fund (IMF) discussed the paper Elements of Effective Policies for Crypto Assets. It focused on the guidance for IMF members regarding the appropriate policy and response to crypto assets. The paper is in line with the IMF's aim and mandate of supporting economic and financial stability across its member states. The paper looks at the variety of questions proposed by its members in regarding to crypto, and includes macro financial considerations such as implications for monetary and fiscal policies. The principle outlined are fully in line with all relevant standards of the Financial Stability Board and other standard setting bodies.
The paper focuses on a framework of nine elements which are capable of assisting members to develop a comprehensive, consistent, and coordinated response towards crypto. These have been developed from the efforts put in place to create effective policies towards crypto assets, which have become somewhat a priority for authorities. This is in part due to the failure of various exchanges, bad actors within the crypto ecosystem, and the collapse of certain cryptos. The feeling that standing back and doing nothing has become untenable, according to policy makers, and therefore in an attempt to allow the continued development of crypto assets, their nine elements are as follows:
Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.
Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures.
Analyse and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets.
Establish legal certainty of crypto assets and address legal risks.
Develop and enforce prudential, conduct, and oversight requirements to all crypto market actors.
Establish a joint monitoring framework across different domestic agencies and authorities.
Establish international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations.
Monitor the impact of crypto assets on the stability of the international monetary system.
Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.
The paper also outlines how it is important to note that the framework of the paper outlines the key elements which are necessary to ensure the objectives are met, however, as with any framework they are not created to solve or resolve any of the existing underlying issues and design flaws within the crypto ecosystem. They do however hope that by adopting the framework, policy makers can better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation associated with it.
International Monetary Fund (IMF) Executive Board Response
The Executive Board of the IMF welcomed the assessment and the opportunity to discuss the papers elements. They noted its timing was very appropriate along with its relevance to the IMF’s wide and diverse membership. This is due to the growing adoption of crypto assets in some countries along with the unusual and extra-territorial nature of crypto assets and its providers, along with its every growing and increasing interlinkages with the financial system,
Their assessment of the paper was clear in their belief that any supposed benefits of crypto assets have yet to materialize, unlike the significant risks which have emerged from said assets. The macroeconomic risks, which encompass risks to the effectiveness of monetary policy, capital flow volatility, and fiscal risks are just among some of the risk that crypto has brought forth. There was also a serious concern regarding the financial stability, financial integrity, legal risks, consumer protection, and market integrity of crypto assets in general, meaning the Executive Board have welcomed the proposed framework along with its elements.
They all came to the same conclusion; that elements of crypto assets have implications for policies that lie at the core of the Fund’s mandate, which also includes the fact that widespread adoption of crypto assets could undermine the effectiveness of monetary policy. They also feel the widespread adoption could also have significant implications for the international monetary system in the longer term.
Therefore the board members believe that robust macroeconomic policies, including credible institutions and monetary policy frameworks are paramount to the requirement and Fund advice in all of these areas is a crucial element. Crypto should not be recognised as an official currency or legal tender due to that requirement of safeguarding monetary sovereignty and stability. Crypto poses risks and liabilities and any government should fully disclose crypto as part of its fiscal risk statement.
They also agree on the requirement for regulations of crypto assets, along with effective implementation of the FATF (Financial Action Task Force - Money laundering) standards. The board also noted how the Fund should be working closely with regulatory framework and the leadership and guidance of standard-setting bodies. They did however agree that strict bans are not the preferred option, but implementing targeted restrictions could work, although some did feel that outright bans could be applied. They did also note that the regulation should be mindful not to stifle innovation, and the public sector could leverage some of the underlying technologies of crypto assets for their public policy objectives.
The framework should be used to guide staff in terms of policy dialogue with country authorities and capacity development activities, although would need to be mindful of the pace and sequencing of implementation should be tailored to countries’ respective circumstances. Strong coordination between authorities, both at the domestic and international levels, is critical, while they also believe the Fund could serve as a bridge between the experience of its membership and the international standard and rule-setting process.
Finally, they believe the Fund could operate as a thought leader in further analytical work on rapidly evolving developments in crypto assets. They accept the importance of promoting ongoing knowledge sharing and lessons from practical implementation issues in the field, while also considering the promotion of a principle of “same activity, same risk, same regulation” between public and private frameworks.
No Shit Sherlock - No Thanks
From reading through the report it is clear there is one objective for the IMF - protect itself and the theory of monetary funds. From the off the nine points of the report are based on no accepting crypto, instead blacklisting it and making it as unappealing as possible, all in the name of protecting monetary sovereignty. Their basis of this is the risks, the volatility, and unpredictability of crypto, which to be fair they have a point. It is volatile. It is a risk. So what? It was designed to be as such, to disrupt the confined thought of the monetary system and to cause disruption. It is deflationary, so yeah, its a hell of a lot better than any existing system the IMF understand and tries to regulate. They mention outright bans, albeit that most are against that, and taking what crypto is and implementing it into the public sector. While there is no issue in monitoring the way crypto impacts the global monetary value, their aims to develop and enforce control are not enticing. In other words its their way or the highway, as if they suddenly realise crypto can have a real impact against their established ways.
What I would love to know is how many of the people from the board of the IMF or involved writing the policy made a fortune from the recent crypto bull run, and only now are interested in closing it off to the rest. The way it is written is very much in a 'we are going to ensure that crypto cannot interrupt the established rule' and quite frankly, I think that's just nonsense. Regulation is one thing, but trying to remove crypto from the masses and make it a 'government tool' is another thing altogether. The point on develop digital infrastructures and alternative solutions for cross-border payments and finance is another way of saying take the most valuable part of crypto, monetise it for the 'banks and co' and leave crypto by the wayside. No thanks, no interested. Didn't work when they tried to force their 'No' stance upon El Salvador, shouldn't work now.
Have a great day.
CryptoGod-1.
*** You can now collect my articles as NFT's thanks to Mirror.xyz. This article will be available as a collectors item for 0.0003 ETH (?$0.48 at time of publishing prices) with a total supply of 50 available. Any an all support is greatly appreciated and the article is available here: https://mirror.xyz/0xE4e7Fa6b6dcF5551CE96627C819dB3D3266DEbcc/UTvO4NPLnnjI2d3HHaXptOscMRH5FIMez8Bw4iSQ2jU
Referral Links and Follow Me:
