The International Monetary Fund (IMF) is calling on global policymakers to begin developing new standards for cryptocurrency. The financial institution is particularly concerned about heightened tensions between Ukraine and Russia.
In its Global Financial Stability Report, IMF addressed the increase of downside risks amid Russia’s invasion. There is a concern particularly around the idea that Russia will use cryptocurrency to evade sanctions imposed by other countries.
According to the report, there has been an increase in cryptocurrency use in emerging markets amid the COVID-19 pandemic and the Russian war against Ukraine. It fears that this increase is partially due to an increased effort to avoid identification checks.
Recent evidence has shown that the increase in digital asset use in Russia is primarily tied to ordinary citizens looking to protect their savings accounts as Russia’s official currency continues to diminish. On the contrary, there is continued concern that Russia and its oligarchs will use crypto to hide their wealth and maintain anonymity.
To combat growing concerns over global financial risks, the IMF suggests that nations consider implementing Financial Action Task Force standards. Implementing these standards would require cryptocurrency exchanges to keep track of sender and recipient identifiers. Following the standards would also provide a framework for new foreign exchange laws and capital flow management.
IMF’s report also wants regulators to pay closer attention to the legal challenges that virtual currencies may bring. The report states, “Authorities should also encourage DeFi platforms to be subject to robust governance schemes, including industry codes and self-regulatory organizations. These entities could provide an effective conduit for regulatory oversight.”
Ideally, IMF wants to see a “comprehensive, consistent, and coordinated,” global policy effort toward cryptocurrency to help tie up any loopholes, reduce fraudulent activities, and ultimately mitigate risks within the global financial system.
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