The International Monetary Fund, or IMF, has pointed to the collapse of FTX as well as the “turmoil” in the banking sector in its calls for regulation of digital assets.
In its Global Financial Stability (lit. “Global Financial Stability Report”) released on April 11, the IMF renewed its calls for “comprehensive and consistent regulation and proper supervision” following the bankruptcies of cryptocurrency companies such as FTX, as well as the subsequent collapse of pro-crypto banks, such as Silicon Valley Bank and Signature Bank. According to the financial organization, the regulation of the entities of the cryptoactive ecosystem -with “strict prudential requirements” for stablecoin issuers- must include the storage, transfer, exchange and custody of digital asset reserves.
“The overflow of [Silicon Valley Bank] from the core financial sector impacted the entire crypto ecosystem and financial institutions exposed to it,” the report states. “Their bankruptcy caused two stablecoins to lose their pegs (Circle USDC and Dai), which held uninsured deposits at the bank , as well as the disappearance of the Signature Bank of New York because investors began to worry about its footprint in the cryptocurrency sector. These developments add to doubts about the viability of digital assets and reinforce the need for proper regulation.”
Clear communication by central banks is vital to minimize economic and financial uncertainty, and using separate tools to achieve monetary policy and financial stability goals can address multiple challenges at once. https://t.co/FbiSNdCpVd #GFSR #IMFpublications pic.twitter.com/rCBJQEyi6Y
— IMF (@IMFNews) April 11, 2023
The report cited a “rough year for cryptocurrency” in 2022, highlighting the collapse of FTX—not the bankruptcies of Terraform Labs, Celsius Network, or others that preceded FTX’s bankruptcy filing—as an event that “created significant contagion.” “in the ecosystem. However, the IMF reported that the impact outside of the crypto space due to these crashes was largely “limited”.
Criticism of cryptocurrencies and digital assets is nothing new to the IMF. In February, the agency’s Executive Board approved a policy framework that did not include the recognition of cryptocurrencies as legal tender. However, members have moved towards regulating digital assets rather than banning them outright.
The international watchdog body Financial Stability Board is scheduled to publish its own recommendations on regulatory and supervisory approaches for crypto assets and stablecoins in July 2023. The G20 also reported in February that the board would publish “a synthesis paper” in September. that integrates the macroeconomic and regulatory perspectives of crypto assets” in coordination with the IMF.
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