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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:
Licensing all crypto service providers.
Tailoring regulations to various digital assets’ core use cases.
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:
Some community banks are beginning to explore offering cryptocurrency services to meet customer demand.
Cryptocurrencies can pose risks related to illicit activity, financial stability, banking disintermediation, and more.
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.