The IMF Would Rather Regulate Cryptos Than Put An Industry-Wide Ban

The International Monetary Fund would rather create a clear distinction between the types of cryptos and prefer regulating crypto assets than imposing a total ban on them, but for the time being, going the extra mile and shutting down all crypto operations is still an option.

IMF Managing Director Kristalina Georgieva discussed how the United Nations financial agency perceives digital assets and what it would want to see in terms of regulation frameworks during a speech on the sidelines of the G20 finance ministers meetings in Bengaluru, India.

“We are very much in favor of regulating the world of digital money,” Georgieva stated, adding that the “first objective is to differentiate between central bank digital currencies that are backed by the state and publically issued crypto assets and stablecoins.”

Georgieva also claimed that there was still a lot of uncertainty regarding the categorization of digital currency, as stablecoins that are fully backed make the economy a "pretty good space," while unbacked crypto assets are speculative, high risk, and not legal tender.

The IMF director also stated that cryptocurrency assets cannot be considered legal cash since they are still not globally supported, citing recent research that suggested international regulating norms.

She cautioned that if cryptocurrencies start to represent a bigger risk to financial stability, the option to outlaw them "should not be taken off the table."

However, Georgieva argued that solid laws, predictability, and consumer protection would be a much more preferable option for the $1 trillion sector and that banning would not be necessary.

Is a total crypto ban possible?

Despite Kristalina Georgieva’s rather optimistic scenario, Shaktikanta Das, the governor of the Reserve Bank of India (RBI), claims that some G20 members want to discuss outright banning cryptocurrencies. Nirmala Sitharaman, the finance minister of India, stated that G20 members have acknowledged India's stance on cryptocurrencies before the G20 conference.

The discussions on the global framework for cryptocurrency legislation may conclude until September when India would preside over the G20 summit. In a press conference at the end of the First G20 Finance Minister and Central Bank Governors (FMCBG) meeting, the Indian Finance minister said that there is almost a clear understanding that anything outside the Central bank is not a currency.

Das highlighted that some people believed cryptos should be controlled in order to limit the hazards and restrict the usage of crypto products. Other people expressed the opinion that the option of a ban or restriction should also be taken into account. However, the Governor stressed that this is still a work in progress.

The governor of the RBI added that there are several significant problems, when it comes to cryptos, financial stability, cyber security, and overall financial stability. The governor of the Indian central bank has previously said that cryptocurrency will be the cause of the next significant financial downturn.