G20 adopts IMF-FSB Synthesis paper on crypto regulation

October 13, 2023 Coin Telegraph

The Group of Twenty accepted the regulatory roadmap proposed in a joint Synthesis paper of the International Monetary Fund and the Financial Stability Board in September.

On Oct. 13, the Group of Twenty (G20), an international forum for the governments and central banks of countries with developed and developing economies, unanimously adopted the G20 Finance Ministers and Central Bank Governors Communique during its meeting in Marrakesh, Morocco.

Regarding crypto, the G20 accepted the regulatory roadmap proposed in a joint Synthesis paper of the International Monetary Fund (IMF) and the Financial Stability Board (FSB) in September. As the G20 statement goes:

“We call for swift and coordinated implementation of the G20 Roadmap, including implementation of policy frameworks; outreach beyond G20 jurisdictions; global coordination, cooperation and information sharing; and addressing data gaps.”

The IMF-FSB Synthesis Paper advocates for comprehensive supervisory oversight of crypto instead of a blanket ban. Its high-level recommendations include cross-border cooperation and information sharing between regulators, a demand for comprehensive governance and risk management frameworks for crypto companies, and a guarantee of access to relevant data provided by companies to the authorities.

According to the Paper, the first review of the proposed measures' implementation status should happen by the end of 2025.

In October, the IMF published another working paper titled “Assessing Macrofinancial Risks from Crypto Assets.” Within it, the IMF researchers propose a crypto-risk assessment matrix (C-RAM) for countries to spot indicators and triggers of potential risks in the sector.

Regulators worldwide have been calling for a global framework on crypto recently. Mário Centeno, the governor of Banco de Portugal, urged for international cooperation to set up a “robust framework” and avoid the possibility of “regulatory arbitrage.” Roughly the same sentiment was expressed by the executive director of strategy, policy and control at the German Federal Financial Supervisory Authority, who prompted about the inconsistencies existing on a global scale.

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CBDC lays foundation for new global monetary system: French central bank

October 4, 2023 Coin Telegraph

BIS

The first deputy governor at Banque de France calls central bank digital currency “the catalyst for improving cross-border payments.“

Representatives of Banque de France, the French central bank, have embraced the global perspective on the central bank digital currency (CBDC) discussion, touting it as the foundation of a new international monetary system.

On Oct.3, Denis Beau, the first deputy governor at Banque de France, called the CBDC “the catalyst for improving cross-border payments by enabling the build-up of a new international monetary system.” The official emphasizes the necessity of considering cross-border issue around CBDCs from the outset and not as an afterthought.

Beau sees several paths for developing a CBDC. The first is the development of common standards and interoperability between wholesale CBDCs and legacy systems. The second — promoted by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) — is the development of regional or global CBDC platforms. Wholesale CBDCs could be standardized to be exchanged directly on these platforms and perform payment versus payment and delivery versus payment transactions.

Beau cited the example of Project Mariana, which explored the possibilities of an automated market maker (AMM). The project, involving the Banque de France, the Monetary Authority of Singapore and the Swiss National Bank, successfully concluded in late September.

The official talked not only about the CBDCs but also about the tokenization of finance. He expressed his belief that the public sector must support the private sector more to enable the full potential of blockchain while limiting the risks. In his opinion, tokenized “central bank money availability” and tokenized assets are allies rather than competitors.

IMF working paper proposes country-level assessment matrix for crypto risks

October 2, 2023 Coin Telegraph

Bitcoin

The matrix aims to identify potential risks associated with the crypto space and policy responses for regulators.

A working paper published by the International Monetary Fund (IMF) proposed a count vulnerabilities and potential policy responses for the crypto sector.

On Sept. 29, the IMF published a working paper titled “Assessing Macrofinancial Risks from Crypto Assets.” Within the paper, authors Burcu Hacibedel and Hector Perez-Saiz proposed a crypto-risk assessment matrix (C-RAM) for countries to spot indicators and triggers of potential risks in the sector. The matrix also aims to summarize regulators’ potential responses to the risks it could identify.

The matrix includes a three-step approach. The first step includes using a decision tree to assess crypto macro criticality or the potential to affect the macro-economy. The next step involves looking at indicators comparable to those used to monitor the traditional financial sector. The last step covers the global macro-financial risks affecting countries’ systemic risk assessment.

*Crypto ecosystem links to the traditional financial sector. Source: IMF*

For example, the authors applied C-RAM to identify risks in El Salvador, a country that made Bitcoin (BTC) a legal tender in September 2021. According to the paper, El Salvador’s use of BTC poses market, liquidity and regulatory risks. The authors wrote:

“The use of crypto assets in El Salvador could also be assessed as macrocritical as recent regulatory and legal changes entail the risk of substantial cryptoization in the country, undermining financial stability and affecting large remittances and other capital inflows.”

The IMF has consistently discouraged El Salvador from adopting Bitcoin. In January 2022, the IMF urged the Central American country to drop Bitcoin’s legal tender status. According to the IMF, using BTC as legal tender carries “large risks” in areas such as financial stability, financial integrity and consumer protection.

As crypto rapidly develops, regulators are playing catch up on putting in place responses to potential risks in the nascent space. On Sept. 7, the IMF and the Financial Stability Board (FSB) collaborated on a joint paper containing policy recommendations, at the request of the Indian G20 presidency. The paper combined standards and consolidated recommendations for various risks associated with activities in crypto.

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IMF, FSB release joint policy recommendations for crypto assets

September 7, 2023 Coin Telegraph

India puts forward suggestions for G20 crypto roadmap

August 2, 2023 Coin Telegraph

Coin Telegraph

The country emphasises the necessity of dealing with digital assets’ risks for developing economies.

India, the nation currently presiding in the G20, supported the Financial Stability Board’s recommendations for the global crypto framework, published in July. The country also emphasises the necessity of dealing with digital assets’ risks for developing economies.

On August 1, India’s Presidency Note for input in a roadmap on a global framework for crypto was published on the page of G20, an intergovernmental forum of the 20 largest economies in the world. The document concurs with the guidelines, written by the FSB, the Financial Action Task Force (FATF) and International Monetary Fund (IMF).

However, the Presidency Note suggests some additions. Among them is an emphasis on developing countries — while the IMF pays attention to developing economies’ specifics in its potential guidelines for crypto, India urges FSB to implement them as well. It also calls for outreach to all jurisdictions to “generate awareness of risks”, starting from countries with higher crypto adoption, and to extend the future regulatory approach to the digital economy beyond the G20 scope.

As revealed in the Note, the so-called Synthesis Paper by IMF and FSB will come out at the end of August and provide a broad roadmap to be considered for adoption by the G20.

In July, FSB published its guidelines for crypto and stablecoins in particular. The FSB states that crypto platforms must segregate clients’ digital assets from their own funds and clearly separate functions to avoid conflict of interest, with regulators ensuring tight cross-border cooperation and oversight. The guidelines also include the obligation for stablecoin issuers to obtain a national license in any single jurisdiction before they can operate there.

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IMF Urges Fiat Currency Be Protected From Crypto, Says Digital Assets Should Never Be Accepted As Legal Tender

July 18, 2023 The Daily Hodl

IMF sees climate change, DAOs, CBDC as threats to Marshall Islands, urges reforms

July 11, 2023 Coin Telegraph

CBDC

Entering the crypto economy is not a good idea for a country with “capacity constraints” and no central bank, the IMF thinks.

The Republic of the Marshall Islands (RMI) has completed its annual talks with the International Monetary Fund (IMF). The country is expected to see gross domestic product (GDP) growth this year, the IMF concluded, in a recovery from the impact of COVID-19 and the contraction of its fishing industry. Climate change and decentralized autonomous organizations (DAOs) remain a threat, however.

The RMI is spread across more than 1,000 islands in the Central Pacific region. It has an average elevation of six feet above sea level and a population of about 56,000. With a 2022 GDP of $261 million, the sale of a single fishing boat led to a drop in GDP of 4.5% that year.

This is what it’s like to fly in the Marshall Islands on @united Island Hopper. #travel pic.twitter.com/lzkcHwLu6b
— Jennifer Broome (@JenniferBroome) July 8, 2023

Fiscal reforms are needed in the RMI ahead of a new Compact of Free Association with the United States that goes into effect in 2024, the IMF said, and fintech initiatives “pose risks to financial integrity of the RMI.”

The RMI passed legislation recognizing DAOs as legal entities and then allowed them to incorporate there as limited liability companies in 2022 — moves that made the IMF profoundly uneasy. It said:

“The enactment of the DAO Act and the move to start registration of DAOs […] are especially concerning given the capacity constraints and questions regarding the understanding of the authorities to adequately regulate and supervise these initiatives.”

The IMF advised the RMI to place a moratorium on DAO registration. The country should first create a monetary authority, the IMF advised. It is not clear whether any DAOs have been registered in the RMI yet.

The country is also in danger of losing its last U.S. dollar correspondent account because of concerns about its fintech and “offshore sector” related to Anti-Money Laundering and Counter-Terrorist Financing. The loss of correspondent accounts, known as derisking, isolates a country from the international economy and is considered controversial from the perspective of social justice.

The IMF also advised the RMI to repeal the SOV, its central bank digital currency (CBDC). While the IMF is generally favorably inclined toward CBDCs, it pressed the RMI to back away from its CBDC project in its 2021 consultation as well, saying the country was unprepared for it. The SOV has yet to launch.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

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What is the International Monetary Fund, and how does it work?

June 30, 2023 Coin Telegraph

Coin Telegraph

Explore the IMF’s objectives, governance structure and key functions in promoting global financial stability.

Maintaining stability in the international financial system is essential for sustaining economic growth in a connected global economy. In this context, the International Monetary Fund (IMF) is essential for fostering international monetary cooperation, maintaining exchange rate stability and managing financial crises. This article provides an overview of the IMF and its objectives, governance structure and key functions.

What is the International Monetary Fund?

The International Monetary Fund is a global institution with its main office in Washington, D.C. Its 190 member countries represent nearly the entire world. The main objective of the IMF is to promote economic growth and stability around the world by offering its member nations technical assistance, financial support and policy recommendations.

Objectives of the IMF

The IMF’s three main goals are as follows:

Promote international monetary cooperation: Encourage member country cooperation to achieve stable exchange rates, ease global trade and support balanced economic growth. This is done through the IMF.
Ensure stability in the international financial system: The IMF strives to avoid and manage financial crises by offering financial assistance to member nations experiencing balance-of-payments issues. This helps to ensure stability in the global financial system.
Provide capacity building and policy recommendations: The IMF helps its member nations strengthen their financial and economic systems in order to advance sustainable development.

Governance structure of the IMF

The IMF’s governance system guarantees that all of its member nations are represented and have equal access to decision-making. The essential components of the IMF consist of:

Board of Governors: The board of governors, which is made up of members from each member nation, convenes once a year to deliberate and decide on IMF guidelines.
Executive Board: The executive board, which consists of 24 executive directors, is in charge of the IMF’s day-to-day operations and decision-making.
Managing Director: The managing director is in charge of overseeing the IMF’s operations and serving as the organization’s global representative.

Key functions of the IMF

The IMF does a variety of tasks to achieve its goals, including:

Monitoring and policy advice: The IMF regularly evaluates the economic and financial health of its members and offers recommendations on how to foster stability and manage weaknesses.
Financial support: The IMF offers financial assistance to member nations experiencing balance-of-payments issues in the form of loans or programs, assisting them in putting required reforms in place and stabilizing their economies.
Capacity development: Through research, training and policy guidance, the IMF helps member nations develop their institutional and technical capabilities, enhancing their potential for economic growth and policymaking.
Data and research: To promote transparency, the IMF publishes reports and projections as well as gathers and analyzes economic and financial data on a worldwide scale. It also undertakes research to better understand and address economic concerns.

IMF’s perspective on digital currencies

The IMF recognizes the potential benefits and risks associated with digital currencies. In its reports and statements, the IMF has highlighted several key considerations regarding digital currencies:

Financial inclusion

The IMF recognizes that digital currencies, in particular, central bank digital currencies (CBDCs), have the potential to improve financial inclusion by giving unbanked populations safe and convenient access to financial services.

A new IMF post warning against "crypto asset adoption" claims that CBDCs "can improve financial inclusion and lower remittances' costs." Does that ring a bell, anyone?

Avoid the CBDC trap, choose #Bitcoin instead! pic.twitter.com/emmTRGO4u7
— JAN3 (@JAN3com) June 22, 2023

Innovation and efficiency

Digital currencies have the potential to bring about technological advancements that could increase the speed and efficiency of financial transactions, cross-border payments and remittances.

Risks and challenges

The IMF has also emphasized the risks and difficulties related to using digital currency. Consumer protection, financial integrity, Anti-Money Laundering measures, cybersecurity and financial stability are a few of these issues. In order to reduce these risks, the IMF underlines the need for effective regulation and oversight.

Cross-border implications

The IMF is aware of the cross-border effects of digital currencies, including possible difficulties with regard to monetary policy, exchange rates, capital flows and international cooperation. It emphasizes the value of global coordination and cooperation in resolving these difficulties.

Central bank digital currencies (CBDCs)

The IMF is intensively researching CBDCs and their possible effects on the world financial system. It highlights the importance of carefully planning and implementing CBDCs to ensure their consistency with goals for monetary and financial stability.

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imf