Regulators around the world have adopted different approaches to regulate cryptos and other digital assets. Per the International Monetary Fund, however, regulatory fragmentation is not necessarily a viable option at this point.
Per the body, the more time individual nations take to draft regulations, the more differences might arise. In a recent released blog post on crypto regulations, the international body has called for global coordination to level out the playing field. Per IMF’s Deputy Director and Assistant Director—Aditya Narain and Marina Moretti,
A global regulatory framework will bring order to the markets, help instill consumer confidence, lay out the limits of what is permissible, and provide a safe space for useful innovation to continue.
One for all, all for one?
Per the IMF, the regulatory fabric is being woven, and a pattern is expected to emerge. However, chalk and cheese approaches are being adopted.
On one extreme, authorities have prohibited the issuance or HODLing of crypto assets by citizens or the ability to transact in them or use them for purposes like payments. On the other, some countries have been much more welcoming. In fact, they have also sought to “woo” companies to develop markets in these assets. Per the IMF,
The resulting fragmented global response neither assures a level playing field nor guards against a race to the bottom as crypto actors migrate to the friendliest jurisdictions with the least regulatory rigor—while remaining accessible to anyone with internet access.
So, having a global framework would prove to be a win-win for all. In the blogpost, the agency chalked out out three reasons stating why the same was necessary. One, it would “fill the regulatory gaps” that arise from cross-border issuance of regulations. Two, it would be “consistent” and align with mainstream regulatory approaches. Three, it would be “comprehensive” and cover all actors and aspects of the crypto ecosystem.
South Korea batting for the same team?
Just a day back, the Director of the Financial Services Commission stated that South Korea will unlikely finalize crypto regulations before other major nations. Elaborating on why, Park Joo-young said,
“Until international consistency is achieved, it is difficult to create a virtual asset regulation system independently in Korea.”
Further commenting on the same, he added that since the virtual asset market is global in nature, various problems like as “regulatory arbitrage” and “investor damage” was possible if regulations were made in one country without related regulations being made in others.