IMF and FSB Joint Policy Paper: Blanket Cryptocurrency Ban Will Not Help Mitigate Risks

Odaily Planet Daily News The International Monetary Fund (IMF) and the Financial Stability Board (FSB) released a joint policy roadmap on Thursday and stated that simply banning cryptocurrencies will not eliminate their risks. A joint IMF and FSB paper will be presented to the G20 this weekend. To address the macroeconomic risks posed by cryptocurrencies, jurisdictions should “strengthen monetary policy frameworks to guard against excessive volatility in capital flows and adopt a clear tax treatment of cryptocurrencies,” the report said. The report reiterated the IMF's position that a blanket ban on cryptocurrencies may not help mitigate associated risks, and that targeted restrictions may be particularly appropriate for emerging economies. Imposing a blanket ban in one jurisdiction that would make all cryptocurrency activity, including trading and mining, illegal would not only be costly and technically challenging, but “could also lead to diversion of activity to other jurisdictions,” the report said. jurisdictions, thereby creating spillover risks”. The report notes that restrictions should not replace strong macroeconomic policies, credible institutional frameworks, and comprehensive regulation and oversight as the first line of defense against the macroeconomic and financial risks posed by cryptoassets; Means all bans should be excluded. Jurisdictions may consider targeted temporary restrictions to manage certain risk factors during times of stress or as countries find better internal solutions. In response to G20 countries' concerns about the proliferation of stablecoins, the IMF/FSB roadmap proposes solutions. Rapid capital outflows or reversals could occur if foreign currency-denominated stablecoins are easier and cheaper to hold than foreign currency bank accounts, the report said. Stablecoins, while facilitating widespread transactions, can be risky in maintaining stable value and rely on private issuers. Global stablecoins adopted by multiple jurisdictions "could transmit volatility more abruptly than other cryptoassets and could pose significant risks to financial stability". (CoinDesk)