International Monetary Fund warns crypto-related risks could soon become systemic
- Reference: 1639119426
- News link: https://www.theregister.co.uk/2021/12/10/imf_calls_for_crypto_regulation/
- Source link:
That stern call was made yesterday in a [1]post by Tobias Adrian, director of the IMF's Monetary and Capital Markets Department, and his deputies Dong He and Aditya Narain.
The three write that while the $2.5 trillion market capitalisation of cryptocurrency potentially does indicate that blockchain and other crypto-related innovations have real value, it may also "reflect froth in an environment of stretched valuations".
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The risk of rapid falls in value is not the only thing the trio fear.
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"Identification, monitoring, and management of risks defy regulators and firms," they wrote, explaining crypto exchanges and wallets pose "operational and financial integrity risks". Scanty investor protections are another worry.
The authors also fear some stablecoins have inadequate reserves and offer "inaccurate disclosure".
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Despite those problems, some markets – and nations – have raced to use cryptocurrencies. By doing so, they "replace domestic currency, and circumvent exchange restrictions and capital account management measures".
"Such risks underscore why we now need comprehensive international standards that more fully address risks to the financial system from crypto assets, their associated ecosystem, and their related transactions, while allowing for an enabling environment for useful crypto asset products and applications," the three write.
[6]The dark equation of harm versus good means blockchain’s had its day
[7]Cryptominers aren't just a headache – they're a big neon sign that Bad Things are on your network
[8]Miscreants make off with $150m of digital assets in BitMart security breach
Those rules need to be international because cryptocurrency easily crosses borders. While individual nations are adapting current regulations or devising new ones, the three fear "existing laws and regulations may not allow for national approaches that comprehensively cover all elements of these assets".
The result could be dangerous loopholes. "Uncoordinated regulatory measures may facilitate potentially destabilizing capital flows," the authors observe.
The trio suggest three regulations:
Licensing of crypto-asset service providers that store, transfer, or settle cryptos, or have custody of reserves and assets. Licences should follow current requirements for financial service providers;
The different uses of cryptocurrency – such as trading it as an asset, or transacting with a stablecoin – should each be regulated with appropriate rules modelled on existing approaches. Crypto investments should therefore be regulated in the same way as securities, and by the same regulators. Services and products for payments should have requirements similar to those of bank deposits, overseen by the central bank or the payments oversight authority.
Banking, securities, insurance, and pension regulators should set capital and liquidity requirements and limits on exposure to different types of crypto assets and require investor suitability and risk assessments.
Predictably, the authors suggest the IMF's Financial Stability Board should use its existing coordinating role to develop a global framework for these regulations.
"The objective should be to provide a comprehensive and coordinated approach to managing risks to financial stability and market conduct that can be consistently applied across jurisdictions, while minimizing the potential for regulatory arbitrage, or moving activity to jurisdictions with easier requirements.
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"If we start now, we can achieve the policy goal of maintaining financial stability while reaping the benefits that the underlying technological innovations bring," the post suggests. ®
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[1] https://blogs.imf.org/2021/12/09/global-crypto-regulation-should-be-comprehensive-consistent-and-coordinated/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YbMzZbOUZGu-wlkZgLAyRwAAAMo&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YbMzZbOUZGu-wlkZgLAyRwAAAMo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YbMzZbOUZGu-wlkZgLAyRwAAAMo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YbMzZbOUZGu-wlkZgLAyRwAAAMo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2021/12/06/the_dark_equation_of_harm/
[7] https://www.theregister.com/2021/12/07/sophos_tor2mine_research_cryptominer_warning/
[8] https://www.theregister.com/2021/12/06/bitmart_breach/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YbMzZbOUZGu-wlkZgLAyRwAAAMo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://whitepapers.theregister.com/
Re: "cryptocurrency easily crosses borders"
Crossing borders is easy for money.
Crossing borders stealthily ... not so much.
You need lots of it and pay a lot for it - ask you local mafia don.
Actually, this is the *only* advantage of Bitcoin for the savvy: illegal money transfers are cheaper and harder to trace.
Re: "cryptocurrency easily crosses borders"
The point about crypto crossing borders quickly is that it requires financial regulators in different countries to collaborate and have a consistent approach. Even though they are widely used outside their home countries' borders, the Fed and the ECB (and their regulatory colleagues) are still able to keep a hand on the tiller of the USD and EUR. The same just isn't true of crypto.
yep... but a Chinese company drops 300 billion and it's just chickenfeed...
IIn other news...
The BBC site has a story about footie fans investing millions in club crypto tokens (coins and NFTs), a few with good results but mostly loss making
https://www.bbc.co.uk/news/technology-59596267
Re: IIn other news...
For every penny someone makes from a system of tokens, someone else must have spent that penny into the system.
you mean
that the fiat inflating currencies that are not cryptos are not a problem also ?
I clicked on the link expecting some new major issue found with cryptography
And then, no.
I'm starting to agree with people complaining about the new use of "crypto" to mean "cryptoscam", err, I mean "currency".
Could we agree to lend them another term to help disambiguate? They could call it "the cybercrypto", for example. Twice as cool, and I'd know where to not click.
Crypto is just another empty investment
One of the fundamental problems with investing is that there's more money to be invested in than traditional investments to purchase. (By "traditional" I mean investments in hard assets that generate a return by making, growing, mining or generally doing useful things.) Humans, being both greedy and ingenious, come up with innumerable ways to invest that are purely virtual, they're based entirely on belief in the financial system or country that's backing them. Should that belief falter the monetary value of those investments could plummet to zero overnight so its important to maintain that belief. At best on a small scale these vehicles are a complicated form of "pass the parcel", the goal being to circulate the investment, inflating its cash value at each turn by extracting a bit of it as the parcel passes and hope like hell that you're not left holding it when the music stops. (This is why you get those sudden market dips when there's even a hint of negative news -- everyone (or rather everyoine's software) is racing to cash out before the cash value drops too far)(which invariably causes the value to drop faster and further).
If you buy a bitcoin you own nothing of value. Its only worth what someone else is prepared to pay for it. It has zero intrinsic value and actually loses value when you trade it because of the relatively high cost of each transaction. Personally I approve of it since the more money it sucks up the less there is to be used to inflate the cost of more tangible investments. (Leverage -- that's another story -- and another evil.)
"cryptocurrency easily crosses borders"
What is it with these endless statements about how funny money does everything and goes everywhere ? My Euros can easily cross borders as well, all I need to do is make a transfer.
And I don't have to pay extortionate amounts of fees to do so.