- IMF calls for consistent international regulation of the crypto industry after famous bankruptcy cases
- It should cover custody of reserves and crypto storage, exchange, and transfer, with additional preventive measures for stablecoins
Crypto markets have had a turbulent year, and the International Monetary Fund (IMF) emphasized the need for consistent, comprehensive industry regulation. The IMF even suggested crypto companies and stablecoin issuers must enforce bank-style capital requirements, CoinDesk wrote.
High-profile bankruptcies fuel concern
On Tuesday, the global fund published its Financial Stability Report, in which it calls for consistent international regulation of the crypto industry after a number of crypto exchanges and crypto-heavy banks went bankrupt. The report states:
The collapse of multiple entities in the crypto asset ecosystem has again made the call more urgent for comprehensive and consistent regulation and adequate supervision focused on protecting consumers and corporate governance.
According to the experts, regulations should cover custody of reserves and crypto storage, exchange, and transfer, with additional preventive measures and requirements for entities carrying out more than one of these functions. Further requirements were prescribed for stablecoin issuers as well.
Viability of digital assets is questioned
The report notes a “rough year for crypto,” during which crypto-related, tech-heavy lenders like Silicon Valley, Signature, and Silvergate went insolvent. According to the monetary experts, these failures were a consequence of FTX’s bankruptcy in November. They find these events raise questions about the feasibility of digital assets and reinforce the need for stricter regulation.
The IMF’s report comes in the wake of a warning by the European Systemic Risk Board (ESRB) that financial watchdogs must be able to monitor crypto lending, crypto staking, crypto leverage, and decentralized finance. According to a statement by the ESRB:
Crypto assets have experienced exponential growth in recent years, and the future development path of this market is uncertain.
Global regulator speaks out against stablecoins
Klaas Knot, chair of the Financial Stability Board (FSB), a group of global regulators, said few stablecoins would be able to respond to its criticisms adequately.
Conventional financial institutions want stoppers on crypto corporations because the merging of different financial functions can result in conflicts of interest, notwithstanding concerns about restricting innovation.
Earlier, the IMF’s Executive Board expressed concerns over crypto’s potential to become legal tender, stopping short of demanding an explicit ban on it.
