Banning crypto shouldn't be completely ruled out if they begin to pose higher risks to financial stability, according to the IMF managing director Kristalina Georgieva.
“We are very much in favor of regulating the world of digital money,” said Georgieva in an interview with Bloomberg, adding that this is a top priority for the Financial Stability Board (FSB), the IMF, and the Bank for International Settlements.
However, “if the regulation is slow to come and crypto assets become a higher risk for consumers and potentially for financial stability,” the option of banning cryptocurrencies “should not be taken off the table,” said Georgieva, citing countries like India that explored such a possibility in the past.
If there’s greater predictability and consumer protection in place, such measures will not be needed, “but we are not yet in this world,” added the IMF chief.
In its last year’s paper, the IMF said that regulation of cryptocurrencies “should not be seen as stifling innovation but rather as building trust.”
Cryptocurrencies are 'not money'
Georgieva also said “there’s still a lot of confusion” about digital money and that the IMF’s “first objective is to differentiate between central bank digital currencies that are backed by the state and publicly-issued crypto assets and stablecoins.”
According to her, state-backed stablecoins have “reliability” and “reasonably good space for the economy,” whereas non-backed crypto assets “are speculative, high risk investment, and not money.”
During the recent G-20 meeting in India, the organization’s finance ministers and central bank governors released a paper that recommended the creation of global regulation standards for the industry, including stablecoins.
Citing the document, Georgieva said that “crypto assets cannot be legal tender because they don’t have the definition of money.”
In a statement on a panel discussion that took place during the meeting, the Ministry of Finance of India said that “there is also an existential question on whether crypto assets are indeed the optimal solution for existing challenges in global financial systems.”