HomeNewsIMF chief economist calls for need to regulate the cryptocurrency sector
IMF chief economist calls for need to regulate the cryptocurrency sector

IMF chief economist calls for need to regulate the cryptocurrency sector

Last updated 24th Jun 2022

The International Monetary Fund and regulators worldwide are in a race to bring some sanity to the crypto sector amid emerging threats. 

Recently, US regulators warned that crypto and climate are among the potential risks to financial stability.

International finance and macroeconomics

Gita Gopinath’s roles as the Chief Economist of the International Monetary Fund (IMF) are:

  • Economic Counsellor of the Fund
  • Director of IMF’s Research Department

Her research focuses on International Finance and Macroeconomics where she’s written articles on various topics, including emerging market crises.

The crypto sector is Gita’s latest research, in which she said, “I think cryptocurrencies are a particular challenge for emerging markets. It would seem that cryptocurrencies are more attractive for emerging markets compared to developed economies. However, emerging markets have exchange rate controls, capital flow controls, and cryptocurrencies can impact that.” 

Gita’s comments come at a time when India, her country of origin, was expected to discuss the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in the winter session. With the parliament’s winter session that began on Nov 29 and ended on Dec 23, it’s unlikely much will come forth.

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Though crypto investors were expecting favorable regulations from the parliament and hoping speculations about a possible crypto ban would turn untrue, the government declared blatantly that cryptocurrencies will not be allowed as legal tender. 

“Even as we are thinking about [it] at a national level, there should simultaneously be a global mechanism through which we are constantly monitoring the movement of technology, so that whether it is your cryptocurrency, whether it is a tech-driven payment system, data privacy, whether it is ensuring that data is used ethically,” said Nirmala Sitharaman in a panel discussion 

The highly commended economist and bearer of some of the world’s prestigious honors and accolades, Gita Gopinath agrees that even though challenging, cryptocurrencies needed strong regulations — and banning was not practical, because of their decentralized nature.

More emerging threats from crypto

IMF identifies more challenges to the crypto market. Apart from determining valuation, other challenges include risk identification, management, and monitoring. This includes:

  • Financial and operational integrity risks from crypto wallets and exchanges
  • Inaccurate stablecoin disclosure
  • Inadequate reserves

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Walter Akolo

Walter Akolo

Walter is a writer from Nairobi, Kenya. He covers the latest news on the cryptocurrency market and blockchain industry. Walter has a decade of experience as a writer.