Even as the Indian policymakers debate how to regulate the ever growing crypto universe there is a advise coming in from the IMF. Gita Gopinath, chief economist of the monetary fund pressed on urgent need to regulate the risks which include evasion of capital control norms in emerging economies. Here is what Gopinath said, delivering a lecture on 'Global Recovery and Policy Challenges in 2022' organised by National Council of Applied Economic Research (NCAER) -:
The risks for emerging markets
"Crypto is a challenge for emerging markets as it is more attractive to adopt these in developing economies. This poses problems, risk to financial investors and saving and it also poses the risk of evasion of capital control rules."
"Usually emerging developing economies have exchange rate controls, capital controls, and capital flow measures,Crypto assets and currencies can be used to evade those regulations."
Urgent regulation needed
"Absolutely important to regulate this sector. It should be treated with a balance of risk and rules. If it is being used to as an investment then the same kind of rules and regulations like on a securities broker/product should be imposed. If financial institute is investing in then one has to insist on buffers."
Banning crypto is impractical
"There is a practical challenge to banning a crypto asset.
Reg. banning them may not work as crypto exchanges are located offshore, which makes it easier for an individual to trade in them despite the ban."
The call for global pact on crypto regulation
"No individual country could solve this problem on its own given the complex cross-border transactions.There is a need for a global policy on it urgently."