8. December 2023

• The IMF has proposed a 5-point plan to regulate the cryptosphere, including licensing and registration of service providers, additional oversight of entities that perform multiple functions, and strict prudential requirements for stablecoin issuers.
• Established financial institutions dealing in cryptocurrencies should be subject to clear risk requirements, and a global crypto regulation and supervision framework should be implemented.
• Cryptocurrency regulation is necessary to ensure the safety of investments and to maintain global financial and monetary stability.

The International Monetary Fund (IMF) has recently released a new five-point plan for regulating the cryptosphere. This plan is designed to ensure the safety of investments and maintain global financial and monetary stability.

The first point of the IMF’s plan calls for the licensing, registration, and authorization of crypto asset service providers. This includes those who provide storage, transfer, exchange, settlement, and custody services, with rules that are similar to those governing providers of services in the traditional financial sector. Customer assets should be kept separate from the company’s own assets and the responsible authority should be clearly defined.

The second point of their plan calls for additional oversight of entities that carry out many different functions in the cryptosphere. If there are any conflicts of interest, they should be assessed by the responsible authority and prohibited if necessary. Such entities should also be subject to stringent regulations on transparency so that all dependencies and operations can be clearly identified.

The third point is directed at stablecoin issuers, who should be subject to strict prudential requirements. The increasing number of investors using stablecoins as a store of value could lead to destabilization of monetary and financial stability, and so regulation on the scale of that employed in the banking sector may be necessary.

The fourth point is directed at established financial institutions dealing in cryptocurrencies. They should be subject to clear risk requirements in order to protect their investments.

Finally, the fifth point calls for the implementation of a robust, global crypto regulation and supervision framework. Cryptocurrency’s borderless nature has highlighted the ineffectiveness of national authorities to adequately deal with digital coins, and so a unified approach is needed.

The IMF’s proposal provides a framework for exchanges and investors to work to, ensuring greater investor protection and global financial stability. As the cryptosphere continues to evolve, it is important that the necessary regulations are in place to protect investments and maintain market stability.