One of the world’s largest financial institutions is struggling to deal with a fast-approaching truth in the world of cryptocurrencies.
The International Monetary Fund (IMF) has made a new push for the world’s governments to regulate cryptocurrencies as the tech tidal wave takes hold.
The volatility that comes with such a new technology has left many traditional economists and existing banks concerned. Several overly eager investors have learned the hard way how quickly online markets can change, sometimes due to something as innocuous as a tweet, and have lost thousands of dollars in cash.
The case for regulation centers on an offer to protect vulnerable investors. However, the most staunch defenders of the free market in the crypto sphere believe that it is the lack of politics that gives the phenomenon so much potential.
The IMF is definitely in the first field, as it asks governments to work together on widespread regulations as banks face a greater push to adopt cryptocurrencies.
“There is an urgent need for cross-border collaboration and cooperation to address technological, legal, regulatory and supervisory challenges,” the organization said in a statement on Friday.
The IMF is suspicious of cryptocurrency’s ability to circumvent traditional cross-country restrictions, warning that the “borderless” payment system could soon become a problem for those in power with responsibility for managing economic systems.
“Crypto’s cross-sector and cross-border mandate limits the effectiveness of national approaches,” the statement continued. “Countries are adopting very different strategies, and existing laws and regulations may not allow for national approaches that comprehensively cover all elements of these assets.
“Importantly, many encryption service providers operate across borders, making monitoring and enforcement difficult. Uncoordinated regulatory measures can facilitate potentially destabilizing capital flows. “
Now, after years of stifling cryptocurrencies, banks and the government have started to embrace the undeniable monster. According to the Sydney morning herald, the Reserve Bank of Australia (RBA) is “moderating calls to adopt its own electronic asset”, in response to what has been the biggest year in cryptocurrency growth to date.
RBA Governor Philip Lowe has remained a staunch skeptic and advocate of strict regulation, warning the public of “uncertainty about the long-term usefulness of these assets.”
Dr. Lowe is also skeptical that consumers will ever replace the use of fiat currency with crypto assets for daily payments, again questioning the volatility and overall value of new technologies.
It’s worth noting that at the time of writing, bitcoin is more than triple its year-on-year value at $ A67,104 per coin.
“To date, we have not seen a strong public policy case for moving in this direction, especially given Australia’s efficient, fast and convenient electronic payments system,” Dr Lowe said this week.
Relevant considerations here include the utility to end users of the underlying payments functionality, the safety of the invested funds, the price volatility, the stability of the intermediaries used, and the ultimate endorsement of the asset, not to mention the significant consumption energy required. to conduct a transaction using some of these crypto assets.
“However, the case for public policy may emerge fairly quickly as technology evolves and consumer preferences change. It is also possible that these tokens could offer a lower cost solution for some types of payments than that provided by existing technologies. “
Treasurer Josh Frydenberg is scheduled to announce a series of regulatory and tax proposals covering digital wallets in the coming weeks.
The move reportedly includes the introduction of a central bank digital currency, which the Treasurer says will put Australia at the forefront of the global fintech economy.
“For consumers, these changes will establish a regulatory framework to support their growing use of crypto assets and clarify the treatment of new payment methods,” he said. “As more Australians use these technologies and invest in these digital assets, it is important that a strong regulatory regime supports their interactions.”
However, the ongoing attempt by existing financial institutions to put the crypto genius back in the bottle has drawn strong criticism from blockchain advocates, who believe that the revolutionary technology can provide a more efficient and ethical platform for people to control. their wealth.
For many, cryptocurrency is still in its infancy and attempts to centralize it will only cloud its potential as an innovative platform for trading for decades to come.
Former IMF chief Simon Johnson said “the jury is still out” regarding cryptocurrency, which has only really existed as a payment system for a decade.
“I think we’re all still waiting for a defining event that really draws the lines of what people think,” he said.