The International Monetary Fund says that crypto-assets have mainstream presence

The crypto ecosystem is evolving very quickly. Regulators now find it difficult to keep up with regulatory strategies. In view of this, the International Monetary Fund (IMF) published a report entitled ‘Regulating Crypto: The right rules could provide safe space for innovation.’

The report was published in the September issue of Finance and Development magazine. It was authored by the Deputy Director of the IMF’s Monetary and Capital Markets Department, Aditya Narain, and Deputy Director Marina Moretti.

According to the 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.

IMF capital markets directors Aditya and Moretti noted that digital assets are now being used for more speculative investments, hedging against weak currencies and payment instruments.

In their report, digital assets have existed for over ten years without much regulation. The work to regulate them has become a top priority on the political agenda. The authors added that recent failures by digital currency issuers, hedge funds and exchanges are also driving factors for regulatory pressure.

Challenges in crypto regulation

The report explains the challenges in regulating the crypto industry. It states that regulatory struggles are due to those in charge not having acquired the skills and talents to keep up with the growing industry.

Given that the data in the digital currency market is disjointed and difficult, monitoring becomes difficult. In addition, regulators find it difficult to keep track of the many players, most of whom are not subject to normal information requirements.

They added that efforts are being made at the national and international level to develop crypto regulations. The work is ongoing and a pattern is expected to emerge very soon. Director Aditya and Moretti worry that the longer it takes, the more national authorities will be shackled by divergent regulations.

The IMF requires a global regulatory framework

The authors of the IMF’s report blame the irregularity of the approach to crypto regulation for the problem faced by regulators. They require a coordinated, regular, consistent and comprehensive global regulatory framework.

They explained that some regulators may put consumer protection, safety and financial integrity first. However, many 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 to create consumer confidence, limit what is permitted and ensure a safe space for innovation to thrive.

Global regulators are now coming together to resolve regulatory issues. A crypto regulatory bill called The Responsible Financial Innovation Act is set to address the biggest issues facing the digital asset industry in the US

The final legal text of the long-awaited ‘Markets in Crypto-Assets (MiCA) Regulations is set to be released next week in Europe. Some major anti-crypto figures have also agreed on the need for comprehensive crypto regulation.

Featured image from Pexels, chart from TradingView.com