The IMF: Global Regulation, Licensing For Bitcoin, And Capital Requirements
The International Monetary Fund stated in their blog that “financial stability risks could soon become systemic in some countries.” In this discussion of “crypto assets” and “associated products,” the IMF stated their opinions on the stability of the markets, the establishment of global oversight to take the reins where nation-states are failing to halt the progress of the rising asset class, licensing, and authorization to operate in the space, closing off the markets with liquidity requirements, and what they call “cryptoization” — because apparently no one knew how to properly explain hyperbitcoinization to them. However, there’s one point I want to hit before dissecting the information in this blog post.
International Monetary Fund Credentials
If you were to visit the IMF blog yourself, you would find that much like Bitcoin Magazine, the IMF has guest contributions. This is how they describe the authors of their content.
“IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day.” – IMF Blog Home
That being said, you’ll typically find a guest disclaimer at the bottom of a post when it is not of an official staff member of the IMF, or unrepresentative of the organization. Let it be known that there is no such disclaimer at the bottom of the article in discussion in which all quotes, unless otherwise noted, are from, “Global Crypto Regulation Should Be Comprehensive, Consistent, And Coordinated“.
These are the authors of this particular article:
· Tobias Adrian – “Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department”
· Dong He – “Deputy Director of the Monetary and Capital Markets Department (MCM) of the International Monetary Fund”
· Aditya Narain – “Deputy Director in the IMF’s Monetary and Capital Markets Department”
If it hasn’t been made abundantly clear at this point, this article is 100% representative of the official position of the International Monetary Fund. Now, let’s begin.
Regulation And Global Risk
“Crypto assets and associated products and services have grown rapidly in recent years. Furthermore, interlinkages with the regulated financial system are rising. Policy makers struggle to monitor risks from this evolving sector, in which many activities are unregulated. In fact, we think these financial stability risks could soon become systemic in some countries.”
In typical end-of-financial-times fashion, the IMF is “concerned” about unregulated digital assets. This isn’t new or a change of opinion, this is right on par with the norm from them, but they are clearly growing more concerned with the actions of policymakers and their idea of destabilization in certain countries as a result.
In this chart sourced by Coingecko, they try to represent the failure of crypto assets to stabilize, but the picture is painted with a dollarized brush.
While there is high volatility in some crypto assets, most Bitcoiners will explain that bitcoin is not volatile. One bitcoin remains worth one bitcoin, no matter the price.
This is entirely determined by your unit bias, or what unit you base the determination of value on. If you value Bitcoin in dollars, the dollar as a medium of exchange is highly volatile with an infinite number of units, meaning you will value your bitcoin as if it is volatile. If you value Bitcoin in bitcoin, or sats, then one bitcoin is always one bitcoin, and a more stable asset has never existed. Bitcoiners rarely measure the value of a bitcoin by its dollarized caricature.
“Cryptoization” And Global Action
“Moreover, in emerging markets and developing economies, the advent of crypto can accelerate what we have called “cryptoization”—when these assets replace domestic currency, and circumvent exchange restrictions and capital account management measures.”
I’m going to be honest; I’d never heard the term “cryptoization” before reading this blog. Hyperbitcoinization? Sure, I’m confident most people in the Bitcoin space, or other crypto asset spaces with Ethereum and their “flippening,” we have all heard those terms before. I genuinely want to know if this is just how out-of-the-loop these writers are on a constant basis, or if these are just small gut-punches they throw out every now and then to Bitcoiners.
Notice the anger they denote towards the circumvention of “exchange restrictions” and “account management measures.” This would be the equivalent of a cryptocurrency platform saying you can’t day trade without $25,000 in the bank, you know, like stockbrokers. These are the standard methods to keep the lower-class where they want them: broke and reliant on the system, otherwise why would they want to keep it around? They simply want those that have to have more, and those without to need more from the system.
“The Financial Stability Board, in its coordinating role, should develop a global framework comprising standards for regulation of crypto assets.”
China couldn’t ban it and take it down, Turkey failed to do the same, and Iran went after mining before changing their mind.
These are hardly the only examples, but the point remains that none of these actions has led to unsustainable damage. In fact, they make the network stronger as those who operate within the network in places that allow legislation like this to happen tend to migrate to places where they are more welcome.
If this framework cannot be achieved at the nation-state level, then a global initiative is required.
“The objective should be to provide a comprehensive and coordinated approach to managing risks to financial stability and market conduct that can be consistently applied across jurisdictions, while minimizing the potential for regulatory arbitrage, or moving activity to jurisdictions with easier requirements.”
“Market conduct” meaning they want to control who is allowed to enter the market. “Minimizing the potential for regulatory arbitrage” means putting conditions in place that allow for controlled arbitrage that benefits the system, and “moving activity to jurisdictions with easier requirements” means when China says they want to ban Bitcoin, they want to punish you for running miners.
“Countries are taking very different strategies, and existing laws and regulations may not allow for national approaches that comprehensively cover all elements of these assets. Importantly, many crypto service providers operate across borders, making the task for supervision and enforcement more difficult. Uncoordinated regulatory measures may facilitate potentially destabilizing capital flows.”
Nation-states have failed and there will not be a national approach that works well enough to make a dent. Exchanges and service providers operate across borders, making it hard for one nation to prosecute. The absence of a global crypto asset dominance will destabilize the dollar. Translated well enough? Let’s keep moving.
Three-Part Global Regulatory Framework
1. “Crypto asset service providers that deliver critical functions should be licensed or authorized. These would include storage, transfer, settlement, and custody of reserves and assets, among others, similar to existing rules for financial service providers. Licensing and authorization criteria should be clearly articulated, the responsible authorities clearly designated, and coordination mechanisms among them well defined.”
The IMF wants to be Oprah with licenses. “You get a license! And you! And you over there mining your Bitcoin, you get a license too!”
· “Storage” meaning wallet providers or custodial services.
· “Transfer” meaning the creation or mining of a block that facilitates a transfer of funds, or being a Layer 2 operator that transfers funds.
· “Settlement” which could be the validation process, the process of running a node for the network which…
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