IMF urges global regulation of Bitcoin and other new financial assets

“Setting up a comprehensive, consistent, and coordinated regulatory approach to crypto is a daunting task. But if we start now, we can achieve the policy goal of maintaining financial stability while benefiting from the benefits that the underlying technological innovations bring.”

One concern of uncoordinated global regulations around crypto assets is a country may lose complete control over its own currency. The IMF noted capital flow regulation may need to be “fine-tuned” to prevent a run on local currencies by crypto players.

RBA governor Philip Lowe on Thursday backed the government’s plan to develop regulations across the fintech sector.

One issue to be investigated is a central bank digital currency. Unlike a cryptocurrency, a central bank digital currency would have the same standing as fiat money.

Dr Lowe said an RBA digital or eAUD (electronic Australian dollar) may be useful for people moving money through digital wallets but there was scant demand at present.

“To date, though, we have not seen a strong public policy case to move in this direction, especially given Australia’s efficient, fast and convenient electronic payments system,” he said.

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“It is possible, however, that the public policy case could emerge quite 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 provided by the existing technologies.”

Dr Lowe said he was sceptical cryptocurrencies would be used for general purpose payments, noting transactions backed by secure fiat currency or a stable value asset were much more attractive than a highly volatile crypto version of money.

He said while there may be a role for crypto-assets, investors should be cautious about their use.

“There is still a lot of uncertainty about the long-term usefulness of these assets. Before investing, it is best to understand fully the underlying value proposition,” he said.

“Relevant considerations here include the usefulness to end-users of the underlying payments functionality, the security of the funds invested, price volatility, the stability of the intermediaries used and the ultimate backing of the asset – not to mention the significant energy consumption that is required to make a transaction using some of these crypto-assets.”

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