IMF-FSB synthesis paper unveils crucial policy recommendations for VDA stability

economictimes.indiatimes.com:

IMF and the FSB created this paper at the request of the Indian G20 Presidency to synthesise the IMF's and the FSB's (together with the SSBs') policy suggestions and criteria. The paper offers a comprehensive set of policy and regulatory recommendations aimed at identifying and addressing the macroeconomic and financial stability risks associated with cryptoassets. Let's understand the key highlights of this paper, which suggest the way forward for proposed policies and regulations to ensure the stability of this rapidly evolving financial landscape. In India, we use the term Virtual Digital Asset (VDA) instead of crypto-asset.

Macro-economic Stability Policies

Safeguarding Monetary Sovereignty and Stability
The IMF-FSB Synthesis Paper underscores the importance of safeguarding monetary sovereignty and stability in the face of VDAs. To achieve this, the paper recommends that VDAs not be granted official currency or legal tender status. This step is crucial to preventing the erosion of traditional monetary systems and maintaining the stability of national currencies.

Guarding Against Excessive Capital Flow Volatility

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Another critical aspect of macroeconomic stability lies in guarding against excessive capital flow volatility induced by VDAs. To mitigate this risk, the paper proposes possible policy steps, including clarifying the legal status of VDAs, if necessary, and ensuring that capital flow management