Context:

The IMF and FSB, upon request from the Indian G20 Presidency, advise against banning crypto-assets.

Recommendations:

• Suggests introducing a licensing regime for crypto-asset platforms.

• Advocates applying anti-money laundering and counter-terrorist financing standards to crypto-assets.
• Marks the beginning of a global conversation on crypto-asset regulation.

Implications on the Financial Ecosystem:

• Macroeconomic stability: Crypto adoption can affect monetary and fiscal policy effectiveness.
• Regulatory challenges: Crypto-assets pose legal, regulatory, and enforcement challenges in different jurisdictions.
• Legal risks: Recognition of crypto-assets as legal tender can raise legal issues.

• Financial integrity risks: Pseudonymity and weak AML/CFT measures make crypto-assets attractive to criminals.Market integrity: Non-compliance and lack of regulation can harm market participants.
• Environmental risks: High energy consumption associated with crypto mining.

Way Forward:

• Protect monetary sovereignty through effective policies.
• Counter capital flow volatility.
• Address fiscal risks and establish clear tax treatment.
• Implement FATF and IOSCO standards for financial and market integrity regulation.

News Source: Livemint