FSB and IMF Publish Roadmap for Global Cryptoasset Regulation | Practical Law

FSB and IMF Publish Roadmap for Global Cryptoasset Regulation | Practical Law

The Financial Stability Board (FSB) and International Monetary Fund (IMF) issued a joint paper that provides a policy implementation roadmap for global regulation of cryptoassets.

FSB and IMF Publish Roadmap for Global Cryptoasset Regulation

Practical Law Legal Update w-040-6981 (Approx. 4 pages)

FSB and IMF Publish Roadmap for Global Cryptoasset Regulation

by Practical Law Finance
Published on 19 Sep 2023 • USA (National/Federal)
The Financial Stability Board (FSB) and International Monetary Fund (IMF) issued a joint paper that provides a policy implementation roadmap for global regulation of cryptoassets.
On September 7, 2023, the Financial Stability Board (FSB) and International Monetary Fund (IMF) issued a joint paper (report) providing a roadmap to global policy implementation. The roadmap provides timelines for the IMF and select international organizations and standard-setting bodies (SSBs) to implement planned and ongoing work related to the implementation of global cryptoasset policy frameworks.
The goal of the roadmap is to build institutional capacity for cryptoassets beyond G20 jurisdictions, enhance global coordination and information sharing, and address data gaps necessary to understand the rapidly changing crypto-asset ecosystem. Action items in the roadmap include:
  • Integration, where suitable, of cryptoasset policies into the IMF's financial surveillance, including:
    • Article IV of the IMF Articles of Agreement, under which the IMF has a mandate to exercise surveillance over the economic, financial, and exchange-rate policies of its members in order to ensure the effective operation of the international monetary system; and
    • its Financial Sector Assessment Program (FSAP), which provides a comprehensive, analysis of the resilience of a country’s financial sector.
    Timeline for this item is 8-12 months.
  • Integration of IMF and World Bank recommendations for a comprehensive global regulatory framework for cryptoassets into technical assistance and capacity building programs. Timeline for this item is 8-12 months.
  • Development of a common framework for addressing data gaps and collect “test data” on cryptoassets by the IMF, with the support of other international organizations and SSBs. Timeline for this item is year-end 2025.
While the report does not establish new policies, recommendations, or expectations for relevant member authorities, it incorporates key elements identified by the IMF in its February 23, 2023 board paper on an appropriate policy response to address macroeconomic, legal, and financial integrity issues presented by cryptoassets, including:
  • Safeguarding monetary sovereignty and stability by strengthening monetary policy frameworks and not granting cryptoassets official currency or legal tender status.
  • Guarding against excessive capital flow volatility and maintaining effectiveness of capital flow management measures.
  • Analyzing and disclosing fiscal risks and adopting unambiguous tax treatment of crypto assets.
  • Establishing legal certainty of crypto assets and addressing legal risks.
  • Developing and enforcing prudential, conduct, and oversight requirements for all crypto-market actors.
  • Establishing a joint monitoring framework across different domestic agencies and authorities.
  • Establishing international collaborative arrangements to enhance supervision and enforcement of crypto-asset regulations.
  • Monitoring the impact of crypto assets on the stability of the international monetary system; and
  • Strengthening global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.
The report also incorporates previously issued regulatory and supervisory recommendations and standards by the FSB and the SSBs to address financial stability, financial integrity, market integrity, investor protection, prudential, and other risks related to cryptoassets (see Legal Update, Global Standard-Setting Bodies Issue Releases Addressing International Crypto-Asset Issues). These recommendations apply the principle of “same activity, same risk, same regulation,” establish a minimum baseline of regulatory and supervisory oversight of cryptoassets that jurisdictions should meet, and aim to address issues common across most jurisdictions, including:
  • Market manipulation.
  • Conflicts of interest arising from vertical integration of activities and functions comingling of client funds.
  • Lack of retail customer protections.
The report notes that macroeconomic and financial-stability risks posed by widespread adoption of cryptoassets include:
  • Undermining monetary policy.
  • Circumventing capital-flow management measures.
  • Exacerbating existing fiscal risks.
  • Diverting resources available for financing the "real" economy.
  • Threatening global financial stability.