Expressing concerns about the potential impact of cryptocurrencies on countries' monetary policies, a policy document prepared during India's G20 Presidency to shape a global framework for crypto asset governance proposes licensing crypto service providers and requiring countries to implement a Financial Action Goal. . . Ensure compliance with (FATF) Anti-Money Laundering and Anti-Terrorist Financing (AML/CFT) in the sector.
However, a policy paper prepared by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) at the request of India's G20 Presidency suggests that a blanket ban may not work given the borderless nature of cryptocurrencies. The document comes days after Finance Minister Nirmala Sitharaman earlier this week called for a framework to address issues related to crypto assets.
New Delhi will seek consensus on the policy document's recommendations among world leaders who arrive in India later this week for the final leg of the G20 summit. G20 countries are expected to discuss the policy document, which was also discussed earlier during a meeting of financial parliamentarians in New Delhi on September 5-6 ahead of the leaders' summit.
The document expresses alarm about the potential impact that cryptoassets could have on the financial stability of countries, saying that widespread adoption of cryptoassets “could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks and reduce available financial assets.” "These resources are intended to finance the real economy and threaten global financial stability."
“These risks may reinforce each other, as financial instability may make it difficult to maintain price stability and vice versa; cause destabilization of financial flows; and will deplete budget resources," he added.
To address macroeconomic risks, the document recommends that jurisdictions “protect monetary sovereignty and strengthen the monetary policy framework, curb excessive volatility in capital flows, and adopt a clear tax regime for crypto assets.”
“To address risks to financial integrity and mitigate criminal and terrorist abuse of the crypto-asset sector, jurisdictions should implement applicable Financial Action Task Force (FATF) anti-money laundering and anti-money laundering (AML) standards. CFT). Virtual Assets (VA) and Virtual Asset Service Providers (VASP),” the company added.
However, the document recommends against introducing a complete ban on crypto-assets, saying it could have a "trickle-down" effect on other jurisdictions.
“Any ban that makes all crypto-asset activity (such as trading and mining) illegal could be costly and technically difficult to implement. “They also tend to increase incentives for evasion due to the inherently unrestricted nature of cryptoassets, leading to potentially increased risks to financial integrity and may also lead to reduced efficiency,” the paper says.
“Bans in one jurisdiction can also lead to the migration of activities to other jurisdictions, creating risks of spillover effects. The decision to ban is not a “simple option” and must be based on an assessment of money laundering and terrorist financing (ML/TF) risks, as well as other considerations such as large capital flows and other public policy objectives,” he said. stated added .
But this does not mean that all obstacles must be removed. “Some jurisdictions, particularly emerging market and developing economies (EMDEs), may wish to take additional specific measures beyond global regulatory frameworks to address specific risks,” it said.
Crypto asset service providers must be licensed or registered and comply with all applicable requirements, the policy document recommends.
“Regulation and supervision of registered or licensed cryptoasset issuers and service providers can support the operation of capital controls, tax and fiscal policies, and financial integrity requirements,” it said. “For example, licensed, regulated and supervised cryptocurrency asset service providers and associated reporting requirements can reduce data gaps, which is particularly important for measuring capital flows based on asset monitoring. Cross-border transactions and capital flows.”
The IMF-FSB roadmap aims to address another G20 concern over the proliferation of stablecoins, whose value is pegged to the value of fiat money, threatening currency substitution or bank run-offs in developing countries. “Rapid capital outflows (or returns) could materialize if foreign stablecoins become easier and cheaper to hold in large quantities compared to foreign currency bank accounts,” the newspaper reported.
He added that global stablecoins, which have been accepted in many jurisdictions, “can generate greater volatility than other crypto assets and pose a significant risk to financial stability.”