A new International Monetary Fund article urges regulators across the globe to develop comprehensive international standards for digital assets.
Concerns: The article raises concerns that an uncoordinated regulatory response to rising crypto valuations could be systemically destabilizing. It also cites a growing risk of “cryptoization” in emerging markets, in which digital assets replace domestic currency and circumvent exchange and capital account management measures.
Recommendations: The IMF researchers recommend a global regulatory framework that provides “a level playing field” with three key elements:
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Licensing all crypto service providers.
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Tailoring regulations to various digital assets’ core use cases.
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Implementing clear requirements on crypto exposures for regulated financial institutions.
U.S. Debate: Cryptocurrency CEOs testified before the House Financial Services Committee this week, endorsing a regulatory regime that doesn’t include oversight by the Securities and Exchange Commission. A Senate Banking Committee hearing set for next week will focus on stablecoin risks.
Banking Guidance: Federal banking regulators recently said they plan to provide greater regulatory clarity on crypto-related activities next year. The OCC separately issued an interpretive letter with guidance on stablecoins and other digital assets.
ICBA Position: In a written statement for the House hearing, ICBA said:
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Some community banks are beginning to explore offering cryptocurrency services to meet customer demand.
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Cryptocurrencies can pose risks related to illicit activity, financial stability, banking disintermediation, and more.
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Policymakers should harmonize regulations to ensure strong, clear, and consistent oversight of cryptocurrency service providers.
More: ICBA blog posts detail growing stablecoin risks to consumers and the financial system, how policymakers are responding, and what decentralized finance means for community banks.
