“Crypto-asset service providers that deliver critical functions should be licensed or authorized,” the International Monetary Fund’s (IMF) said in a blog post. It suggested that a global regulatory framework for crypto assets should “provide a level-playing field across the activity and risk spectrum.” The activities referred to include storage, transfer, settlement, and custody of crypto reserves and assets, among others. The IMF-proposed framework batted for the rules to be similar to existing rules for traditional financial service providers. Moreover, it called for the licensing and authorisation criteria to be articulated unambiguously coupled with a clear designation of responsible authorities and well-defined coordination mechanisms. Why such a framework matters: Crypto assets have grown rapidly in the last few years with total market capitalisation nearing $2.5 trillion. Countries are waking up to its growing influence and its cross-sector and cross-border remit limits the effectiveness of national regulatory approaches. What does the IMF recommend in its global framework? The IMF acknowledged the economic value of the underlying technology (blockchain) powering crypto assets but it also wrote that crypto might be “froth in an environment of stretched valuations”. Here are some of the measures policymakers should keep in mind: Requirements: Legislators should look to tailor requirements focusing on the main use cases of crypto assets and stablecoins, as per IMF. The economic body advised that all regulatory authorities must coordinate to address risks arising from evolving use cases of crypto. It advocated for the following: Crypto products for investments should have requirements similar to those of securities…
