Crypto-assets are no longer niche, and regulators need to catch up — IMF

by · September 5, 2022

In recent years, cryptoassets have moved from being “niche products” to having a more mainstream presence, which has led to the need for more comprehensive regulation of the space, according to the International Monetary Fund (IMF).

In a new report authored by IMF Capital Markets Director Aditya Narain and Assistant Director Marina Moretti, officials noted that crypto-assets have moved away from being “niche products” to those used for speculative investments, hedging against weak currencies and payment instruments.

The authors added that this, along with recent failures by crypto issuers, exchanges and hedge funds, has “fueled the push to regulate.”

However, developing a regulatory framework for cryptoassets is an uphill battle, according to Narain and Moretti, who highlight the market’s rapid development, the difficulty of monitoring and the absence of usable skills among regulators among the more serious obstacles, saying:

“Regulators are struggling to acquire the talent and learn the skills to keep pace given stretched resources and many other priorities.”

The authors have also called out the inconsistent approach to crypto regulation among various regulators, instead arguing for a coordinated, consistent and comprehensive global crypto regulatory framework.

“Some regulators may prioritize consumer protection, others safety and soundness or financial integrity. And there are a number of crypto actors – miners, validators, protocol developers – that are not easily covered by traditional financial regulation,” they explained.

“A global regulatory framework will bring order to markets, help instill consumer confidence, set the boundaries of what is permissible, and provide a safe space for useful innovation to continue.”

Regulators worldwide have continued to gather around the regulatory table.

In Europe, the final legal text for the long-awaited Markets in Crypto-Assets (MiCA) regulations is set to be released in the next four to six weeks. In the US, a crypto regulatory bill called the Responsible Financial Innovation Act is set to address some of the biggest issues facing the digital asset sector.

Related: Australia’s new government is finally signaling its stance on crypto regulation

Even staunch crypto-skeptics have begun to fall in line with the idea of ​​regulation over any widespread ban, with US Congressman Brad Sherman the latest to change his tune after admitting the market “has too much money and power behind it” to ban the. now.