After a rollercoaster ride for the cryptocurrency market in the past year, the International Monetary Fund (IMF) has set its sights on stablecoin issuers and major crypto conglomerates, intensifying scrutiny and regulation in the rapidly evolving digital asset space.
IMF Calls For Crypto Regulation After Collapse Of Exchanges
The International Monetary Fund (IMF) has cited the downfall of FTX and the turmoil in the banking sector as reasons to push for the regulation of digital assets.
In its Global Financial Stability Report published on April 11, the IMF reiterated the need for “comprehensive and consistent regulation and adequate supervision” in light of the recent failures experienced by cryptocurrency firms like FTX, as well as the subsequent collapse of crypto-friendly banks such as Silicon Valley Bank and Signature Bank.
The financial institution emphasized that regulations for participants in the crypto asset ecosystem should encompass aspects like storage, transfer, exchange, and custody of reserves for digital assets and include “strict prudential requirements” for stablecoin issuers. The report said:
“Silicon Valley Bank’s spillover from the core financial sector reverberated across the crypto ecosystem and financial institutions exposed to it. Its failure resulted in a depegging of two stablecoins (Circle USDC and Dai), which held uninsured deposits in the bank, as well as the demise of Signature Bank of New York because investors became concerned about its footprint in the crypto sector. These events add to questions about the viability of digital assets and reinforce the need for appropriate regulation.”
2022 Was A Rough Year For Crypto: IMF
The report referred to 2022 as a “challenging year for crypto,” highlighting the downfall of the FTX exchange as a key event that “generated substantial contagion” within the ecosystem. It did not mention the preceding failures of Terraform Labs, Celsius Network, or others that led to the company’s bankruptcy filing. Despite this, the IMF noted that the repercussions of these collapses on areas beyond the crypto space were mostly “contained.”
“Crypto-assets have experienced exponential growth in recent years, and the future development path of this market is uncertain.”
The IMF’s critique of cryptocurrencies and digital assets is not a recent development. In February, the organization’s executive board approved a policy framework that excluded the recognition of crypto as legal tender. Nevertheless, members have seemingly favored regulating digital assets rather than implementing outright bans.
The international oversight organization, Financial Stability Board, is set to release its recommendations on regulatory and supervisory approaches to crypto assets and stablecoins in July 2023. Furthermore, the G20 announced in February that, in collaboration with the IMF, the board would be publishing “a synthesis paper integrating the macroeconomic and regulatory perspectives of crypto assets” in September.