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IMF mulls holistic regulation for cryptocurrency

cryptocurrencies

PHILIP CLEMENT ABUJA

Due to the wide patronage for crypto currencies, the International Monetary Fund (IMF) says it is considering a global regulation for the digital currency.

IMF says the rationale behind the decision is because they believe that the blockchain may damage the conventional financial system.

The IMF revealed in a document posted on its website that soon, countries will begin to witness a situation where cryptos will replace domestic currencies.

This will affect emerging markets and developing economies like Nigeria who will face more immediate and acute risks of currency substitution through cryptoassets.

Many countries like Nigeria, Bolivia, Turkey, Egypt and Indonesia have banned crypto currencies from the banking channels, while China has been brutal with its restrictions.

The global financial regulator disclosed that the currency has risen to $2.5trn.

According to the IMF, the amount may have resulted from an environment of stretched valuations.

IMF believes that determining the valuation of crypto assets is not the only challenge in the crypto ecosystem.

“Moreover, in emerging markets and developing economies, the advent of crypto can accelerate what we have called ‘cryptoization’when these assets replace domestic currency and circumvent exchange restrictions and capital account management measures,” the IMF noted.

The Washington based lender said such risks underscore the need for comprehensive international standards to fully address risks to the financial system from crypto assets.

The standards would also deal with their associated ecosystem, and their related transactions, while allowing for an enabling environment for useful crypto asset products and applications.

“The Financial Stability Board, in its coordinating role, should develop a global framework comprising standards for regulation of crypto assets,” IMF added.

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Ihesiulo Grace

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