The International Monetary Fund (IMF) has called for increased regulation of digital assets in the wake of the collapse of cryptocurrency firms such as FTX and the subsequent failure of crypto-friendly banks including Silicon Valley Bank and Signature Bank.
IMF calls for consistent regulation and supervision of crypto assets
The IMF’s Global Financial Stability Report, released on April 11, has renewed calls for “comprehensive and consistent regulation and adequate supervision” of entities in the crypto asset ecosystem, with “strict prudential requirements” for stablecoin issuers. However, the report recommended that regulation should cover the storage, transfer, exchange, and custody of reserves for digital assets.
Also, the IMF cited the failure of Silicon Valley Bank, which had a spillover effect on the wider crypto ecosystem, resulting in the depegging of two stablecoins and the collapse of Signature Bank of New York. The report added that these events “add to questions about the viability of digital assets and reinforce the need for appropriate regulation.”
The report also mentioned the collapse of the FTX exchange in 2022, stating that it “created significant contagion” in the ecosystem, but noted that the impact outside of the crypto space was largely limited. The IMF has previously criticized cryptocurrencies and digital assets, and in February, its executive board endorsed a policy framework that did not recognize crypto as a legal tender.
However, the IMF has reportedly leaned towards regulating digital assets rather than outright banning them. The Financial Stability Board plans to publish its own recommendations for regulatory and supervisory approaches to crypto assets and stablecoins in July 2023, while the G20 is set to release a synthesis paper integrating macroeconomic and regulatory perspectives on crypto assets in coordination with the IMF in September.
