The crypto ecosystem is evolving very rapidly. Regulators are now finding it hard to keep up with the regulation strategies. In the sight of this, the International Monetary Fund (IMF) published a report titled ‘Regulating Crypto: The right rules could provide safe space for innovation.’
The report was published in the September edition of its Finance and Development magazine. It was authored by the Deputy Director of IMF’s Monetary and Capital Market Department, Aditya Narain, and Deputy Director Marina Moretti.
According to IMF, digital assets are no longer niche products. They now have a more mainstream presence, hence the need for more extensive regulation in the crypto space.
The IMF’s Capital Markets Directors Aditya and Moretti noted that digital assets are now used for more speculative investments, hedges against weak currencies, and payment instruments.
In their report, digital assets have existed for over ten years without much regulation. The efforts to regulate them have moved to be a top priority of the policy agenda. The authors added that recent failures of digital currency issuers, hedge funds, and exchanges are also propelling factors for regulation pressure.
Challenges In Crypto Regulation
The report explains the challenges in the regulation of the crypto industry. It states that regulation struggles are because those in charge have not acquired the skills and talents to keep pace with the growing industry.
Also, given that the data in the digital currency market is patchy and tricky, monitoring becomes difficult. Moreover, regulators find it difficult to keep tabs on the numerous actors, most of whom are not subject to normal disclosure requirements.
They added that efforts are being made on national and international levels to develop crypto regulations. The work is ongoing, and a pattern is expected to come up very soon. Director Aditya and Moretti worry that the longer it takes, the more national authorities will get chained into diverging regulatory frameworks.
IMF Calls For Global Regulatory Framework
The Authors in the IMF’s report blame the irregularity in the approach to crypto regulation for the problem that regulators are facing. They call for a coordinated, regular, consistent, and extensive global regulatory framework.
They explained that some regulators might put consumer protection, safety, and financial integrity first. However, many digital asset miners, validators, and protocol developers are not easily covered by traditional financial regulation.
The report added that a global framework would bring order to the markets. It will also help instill consumer confidence, limit what is permissible and ensure a safe space for innovation to thrive.
Crypto total market cap takes a blow on the daily chart | Source: TradingView.com
Global Regulators are now gathering to solve the regulatory problems. A crypto regulatory bill called The Responsible Financial Innovation Act has been set to address the biggest questions facing the digital assets industry in the U.S.
The final legal text for the long-expected ‘Markets in Crypto-Assets (MiCA) regulations is ready to be released next week in Europe. Some major anti-crypto personalities have also agreed on the need for comprehensive crypto regulation.
Featured image from Pexels, chart from TradingView.com
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