An IMF-FSB policy paper cautions G20 lawmakers against sweeping crypto bans
- Ahead of a G20 summit, IMF and FSB have cautioned against blanket crypto bans.
- In a policy paper, they recommend targeted restrictions to manage specific risks instead.
- The paper calls on G20 leaders to establish a global minimum standard for crypto regulation.
- If countries then want to impose additional restrictions, they can build on top of the baseline.
As world leaders prepare for a G20 summit in New Delhi, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) are warning against policies that attempt to ban cryptocurrencies.
In a paper published by the two bodies on Wednesday, September 7, the IMF and the FSB argue that blanket crypto bans are difficult to enforce. Instead, governments should focus on targeted restrictions to manage specific risks, the paper concludes.
Crypto Bans “Costly and Technically Demanding”
The recently published policy paper discusses a broad range of issues lawmakers face when dealing with crypto.
Its authors recognize that crypto assets pose real financial stability risks and can be used by criminals to launder money.
However, due to the inherent borderless nature of crypto assets, they found that: “Blanket bans that make all crypto-asset activities (e.g., trading and mining) illegal can be costly and technically demanding to enforce.”
What’s more, such bans tend to increase the incentives for circumvention, they add.
Due to the inherent borderless nature of crypto assets, “bans in one jurisdiction could also lead to activity migrating to other jurisdictions, creating spillover risks,” the paper notes.
Targeted Restrictions Justified in Some Situations
Despite cautioning against sweeping crypto bans, the IMF and the FSB maintain that “in some situations, targeted restrictions could be justified to manage specific risks.”
As examples of specific, limited restrictions that have already been deployed by G20 nations, the paper points to privacy coin bans (which have been implemented in Japan and Australia) and restrictions on crypto advertising in the UK and Spain.
Building a Global Regulatory Framework for Crypto
Much of the emphasis in the IMF-FSB paper is on the need for a coordinated global approach to crypto regulation.
The authors urge G20 governments to establish a ‘regulatory baseline’ that outlines a unified rulebook and sets a minimum standard of oversight binding on all participating countries.
International alignment on crypto policy would better empower law enforcement agencies to crack down on criminal networks using cryptocurrencies
For example, the paper argues that G20 nations should all agree to impose the “travel rule,” requiring crypto firms to collect, store and transmit information about the originator and beneficiary of transfers they facilitate.
Meanwhile, for international businesses that deal with crypto assets, a shared rulebook that applies across the G20 would lower the compliance burden of following divergent regulations in each country.
