Stablecoin Issuers, Conglomerates Targeted by IMF After Crypto's 'Rough Year'

FTX and banking sector collapses show the need for stronger consumer protection, governance norms, the agency said.

AccessTimeIconApr 11, 2023 at 2:30 p.m. UTC
Updated Apr 11, 2023 at 5:43 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

A "rough year" for crypto markets has underlined the need for comprehensive and consistent regulation of the sector, the International Monetary Fund (IMF) has said, suggesting stablecoin issuers and crypto conglomerates need to have bank-style capital requirements.

In its "Global Financial Stability Report" published Tuesday, the IMF joins the standard setters at the Financial Stability Board in calling for consistent international regulation of the cryptocurrency sector after a year that has seen a number of collapses of major exchanges and crypto-linked banks.

“The collapse of multiple entities in the crypto asset ecosystem has again made the call more urgent for comprehensive and consistent regulation and adequate supervision” focused on protecting consumers and corporate governance, the report said.

The report added that regulations should cover crypto storage, transfer, exchange and custody of reserves, with extra prudential requirements for those carrying out multiple functions and for the issuers of stablecoins – tokens that seek to maintain their value versus fiat currencies.

The report cites a “rough year for crypto,” in which the collapse of crypto- and tech-heavy lenders Silvergate, Signature and Silicon Valley Banks followed from the bankruptcy of the FTX crypto exchange in November. “These events add to questions about the viability of digital assets and reinforce the need for appropriate regulation,” the IMF said.

The IMF’s report followed a warning issued earlier Tuesday by the European Systemic Risk Board (ESRB) that financial authorities need to be able to monitor crypto leverage, decentralized finance and crypto staking and lending.

"Crypto-assets have experienced exponential growth in recent years, and the future development path of this market is uncertain,” said a statement by the ESRB, a watchdog agency chaired by the European Central Bank’s Christine Lagarde.

The Financial Stability Board, a grouping of international regulators, is due to issue its own crypto rules in July, and its head, Klaas Knot, has already said many existing stablecoins would be unlikely to meet its strictures. Many traditional finance players want to see curbs on crypto conglomerates because the mixing of different financial functions could lead to conflicts of interest, despite concerns about constraining innovation.

The IMF’s Executive Board has previously expressed concerns over the potential of crypto to usurp the role of legal tender, though it stopped short of calling for an outright ban on digital assets.

Edited by Stephen Alpher.


Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.