IMF-FSB Crypto Roadmap Says Blanket Bans Don't Work

IMF-FSB Crypto Roadmap Says Blanket Bans Don’t Work

Updated: 07 September 2023

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A joint policy roadmap published by the International Monetary Fund (IMF) and Financial Stability Board (FSB) warns against blanket crypto bans in managing risks.

Their joint paper, released on Thursday, says that blanket bans are “costly and technically demanding to enforce.” They also may unintentionally worsen things by giving actors reason to try and get around the rules, ”potentially heightening financial integrity risks,” it added.

Our paper outlines a comprehensive policy response to #cryptoasset risks, drawing on existing recommendations and guidelines from @IMFNews, FSB, @FATFNews and other international organisations and standard-setting bodies:https://t.co/CRBI0AAyZG #Crypto #FinancialStability #G20 pic.twitter.com/WbXqASZeCg

— The FSB (@FinStbBoard) September 7, 2023

IMF-FSB Roadmap Advises Targeted Crypto Restriction

The IMF-FSB roadmap recommends implementing targeted restrictions. Under certain circumstances, it may be justifiable to implement specific measures to address crypto-related risks, especially for countries with limited resources or those in the process of establishing regulatory frameworks, it said.

These restrictions could focus on particular crypto products (such as privacy tokens), specific activities (like payments in Ukraine), or even specific entities (for instance, banks in Nigeria). Such targeted measures may be necessary in the short term while countries build up their internal capacity, including knowledge and awareness, in preparation for comprehensive regulation, the paper said.

Emphasizing a Holistic Approach

However, the paper also stresses that even when jurisdictions consider temporary restrictions, these measures should be part of a broader policy response.

“Restrictions should not substitute for robust macroeconomic policies, credible institutional frameworks, and comprehensive regulation and oversight, which are the first line of defence against the macroeconomic and financial risks posed by crypto-assets,” it said.

Paper Says Crypto Still May Threaten Global Financial Stability

Despite the warning against blanket bans, the global standard setters acknowledged that widespread adoption of crypto assets could “undermine the effectiveness of monetary policy,” bypass measures to manage the flow of capital, worsen financial risks, redirect resources that could be used to support the real economy, and pose a threat to the stability of the global financial system. “These risks could reinforce each other, as financial instability can make maintaining price stability more difficult and vice versa; cause destabilising financial flows; and strain fiscal resources,” said the paper

India, as the president of the G20, had requested the IMF and the FSB to draft this paper for policy recommendations and standards to help authorities address the macroeconomic and financial stability risks posed by crypto-assets. The paper is expected to be presented to G20 member countries ahead of the Leaders’ Summit on September 9 and 10.