• The International Monetary Fund (IMF) recommends all crypto asset service providers to be licensed, registered, and authorized.
• Entities that carry out multiple functions in the cryptosphere should be subject to additional oversight and stablecoin issuers should be subject to strict prudential requirements.
• There needs to be a robust, global crypto regulation and supervision framework.

The International Monetary Fund (IMF) has recently released a set of recommendations for global crypto regulation and supervision. This set of recommendations is aimed at providing a framework for exchanges, investors and other entities operating in the cryptosphere.

The first recommendation is for crypto asset service providers to be licensed, registered, and authorized. This includes companies providing storage, transfer, exchange, settlement, and custody services. The responsible authority should ensure that customer assets are held separately from the company’s own assets and should enforce stringent regulations on transparency.

The second recommendation is that entities that carry out many different functions in the cryptosphere should be subject to additional oversight. Any conflict of interest should be assessed by the responsible authority and prohibited, if necessary. These entities should also be subject to stringent regulations on transparency to ensure that all dependencies and operations can be clearly identified.

The third recommendation is that stablecoin issuers should be subject to strict prudential requirements. Stablecoins are becoming a store of value for increasing numbers of investors and without proper oversight and regulation, their holdings could destabilise monetary and financial stability. In cases of major stablecoins, a regulation on the scale of that employed in the banking sector could be required.

The fourth recommendation is that established financial institutions that deal in cryptocurrencies should be subject to clear requirements regarding the risks that arise from transacting in crypto. Finally, the IMF recommends that there needs to be a robust, global crypto regulation and supervision framework. The borderless nature of crypto has highlighted the ineffectiveness of national authorities to adequately deal with the digital coins and only a unified approach that can adapt to the evolving nature of the cryptosphere can provide the necessary oversight and provide adequate protection to investors.