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According to the International Monetary Fund, crypto assets have transitioned from being "niche products" to having a more popular presence in recent years, necessitating the need for more extensive regulation of the space (IMF).
Crypto assets have evolved from being "niche goods" to being used for speculative investments, hedges against weak currencies, and payment instruments, according to a new research prepared by IMF capital markets director Aditya Narain and assistant director Marina Moretti.
The authors went on to say that this, along with previous collapses of crypto issuers, exchanges, and hedge funds, has "added momentum to the regulatory push."
The failures of crypto issuers, exchanges and hedge funds have added impetus to the push to regulate these digital assets. Read more in F&D. https://t.co/Vfyr4uN6NY pic.twitter.com/4LF9P3DZpc
— IMF (@IMFNews) September 5, 2022
However, according to Narain and Moretti, building regulatory frameworks for crypto assets is a challenging task, citing the market's rapid expansion, the difficulties of monitoring, and the lack of practical skills among regulators as some of the most important obstacles, stating:
"Given limited resources and competing goals, regulators are trying to find people and master new skills."
The authors also criticized individual authorities' varied approach to crypto regulation, instead advocating for a coordinated, uniform, and complete worldwide crypto regulatory framework.
"Some authorities may prioritize consumer protection, while others may favor safety and security or financial integrity. Furthermore, there are a variety of crypto actors - miners, validators, protocol developers — who are not easily covered by traditional financial regulation "They elaborated.
"A worldwide regulatory framework will bring order to markets, assist instill consumer trust, define allowable limits, and give a safe space for meaningful innovation to proceed."
Regulators from all over the world have gathered around the regulatory table.
The final legislative wording for the long-awaited Markets in Crypto-Assets (MiCA) legislation is expected to be published in Europe within the next four to six weeks. In the United States, the Responsible Financial Innovation Act, a crypto regulation law, is expected to address some of the most pressing issues confronting the digital assets sector.
Even strong crypto doubters have begun to favor regulation over a blanket ban, with U.S. congressman Brad Sherman the latest to change his tune after acknowledging the market "has too much money and force behind it" to outlaw it now.
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