The IMF is Coming For CRYPTO!! Here’s Why!

Recently the international monetary fund Or IMF published a report recommending How countries around the world should Regulate cryptocurrencies especially Stable coins now given that the IMF has Significant influence in the countries That are the most likely to adopt Cryptocurrency the recommendations in This report should not be taken lightly So today I’m going to break down the Imf’s crypto report explain what it says In simple terms and tell you what it Could mean for the crypto Market Foreign The IMF report I’ll be summarizing today Is titled quote regulating the crypto Ecosystem the case of stable coins and Arrangements it was published late last Month and I’ll leave a link to the full Text in the description if you’re Interested Now what’s interesting about the report Is that the subtitle is different from What’s noted on the IMF website whereas The IMF website says the case of Stablecoins and Arrangements the report Says quote the case of unbacked crypto Assets must have been a mistake Now in the summary the authors state That quote unbacked crypto assets are The oldest and most popular type of Crypto assets relying not on any backing Asset for Value but instead on supply And demand in other words every

Cryptocurrency is unbacked because its Price is based on supply and demand Now if you take two seconds to think About that statement you’ll realize that The price of every asset is based on Supply and demand this includes Fiat Currencies which are only stable Relative to non-currency assets as we’ve Recently seen with the British pound Fiat currencies can be extremely Volatile too more about that in the Description I digress Next the authors talk about the Epic Rise and fall of the crypto market During the last bull cycle they Acknowledged that the crypto Market is Not nearly significant enough to justify Stability concerns even so they argue That crypto regulations are urgently Required no surprises there Is where things get a bit concerning Though the authors note that quote Crypto assets were designed to Disintermediate financial services but New types of centralized entities such As exchanges and wallet providers offer Key functions to users This is concerning because it seems to Suggest that crypto wallet providers Will be regulated even though they don’t Have control of the private keys to your Crypto wallet if true this could set a Dangerous precedent for the crypto Industry

The authors go on to confirm what I Mentioned in the introduction and that’s That the IMF is especially concerned About regulatory gaps in cryptocurrency In developing countries that’s because Developing countries are the most likely To adopt cryptocurrency and ditch Fiat Currencies like the US dollar For context the IMF is notorious for Issuing U.S dollar denominated loans to Developing countries in crisis these Loans often come with strings attached In the case of Argentina the IMs recent Loan agreement came with a condition to Discourage the adoption of crypto in the Country funny that Now the authors go on to admit that Quote broadbands on crypto assets are Likely to be disproportionate and Ineffective in the long run look no Further than China for evidence of that Brave souls on the Chinese Mainland Continue to mine BTC despite the ccp’s Bitcoin mining ban Naturally the report’s authors propose Setting Global standards for crypto Regulations to ensure the industry Continues to evolve without threatening The existing Financial system that’s not What they said but it’s what they mean The purpose of the IMF is to protect the Current Financial system after all Now the authors accurately point out That the primary drivers of crypto

Adoption include quote weak Macroeconomic conditions misleading Marketing and a lack of trust in Traditional Financial Services Not so sure about that second driver but The third one definitely hits home The authors then specify the six Elements of an effective framework for Global crypto regulations the first is Setting Global standards the second is Access to data about crypto the third is A risk-based focus and the fourth is That it covers all crypto niches The Fifth Element caught my eye because it States quote if entities or activities Become systemic they should be subject To additional requirements translation If a crypto project or company becomes Too big and starts to rock the boat Crack down on it with lots of Regulations Now the final element is straightforward And that’s to ensure that crypto Regulations are the same across Countries that’s simply because the IMF Doesn’t want crypto to flourish outside Of its control or oversight and that Requires Global coordination The authors reveal that the financial Stability board or FSB will likely be The entity that will turn these six Elements into Global crypto regulations They also note that the crypto Regulations they’re discussing in this

Report also apply to stable coins which They consider to be backed crypto assets Interesting indeed now at the end of the Summary the authors provide a table Which contains detailed crypto Regulations the IMF would like to see I Won’t list them all for the sake of time But there were a couple that stuck out To me One is quote restrictions on regulated Entities engaging with certain risky Crypto assets This sounds great in theory but in Practice it could lead to Cryptocurrencies being wrongly labeled As high risk by Regulators that are Being lobbied by the Banks Another is quote limits to products Offered on crypto asset exchanges now Something tells me that privacy coins Are in the sniper scope here as well as Any other cryptos that threaten The Current financial system on the bright Side there was no mention of banning Retail investors from Trading or holding Crypto note that this is something that Could unironically happen in the United States after the next crash more about The central Banker behind that master Plan in the description Anyways in the footnotes of the Introduction the authors seem to imply That crypto wallet providers would not Be subject to regulatory scrutiny but

It’s not entirely clear This is because they just say that the Concept of not your keys not your coins Equals decentralization The authors then clarify that quote Wallet providers much like Banks and Electronic payments wallets hold assets On behalf of consumers and initiate Transfers This again suggests that the authors Aren’t targeting self-custodial crypto Wallets hmm That said you should know that the Financial action task force or fat f is Planning on labeling every crypto Transaction that doesn’t involve an Intermediary as high risk this means That over time self-custody could become More difficult due to this high risk Designation more about that in the Description Now the authors then go on to define the Scope of their report this relates to The so-called unbacked crypto assets Which exist on distributed Ledger Technologies such as blockchains Obviously the authors don’t believe Unbacked crypto assets have any Objective value it’s all just Speculation in their eyes What’s amusing is the authors claim that Quote even where some crypto assets are Legal tender their use as a payment or Remittance tool remains very small they

Are still not considered a viable medium Of exchange and they are less likely to Be used by vulnerable or unbanked Consumers This is amusing because it’s an Acknowledgment of El Salvador’s adoption Of BTC as legal tender This is something the IMF opposed and it Serves as proof that yes BTC can become An actual currency Whether BTC should be a currency or a Store of value is a topic for another Time now in addition to unbacked crypto Assets the authors list utility tokens Security tokens and stable coins as Other categories of cryptocurrency they Define utility tokens as digital Reward Points security tokens as tokenized Assets like stocks and Sable coins as Stable crypto assets what’s concerning Is that the authors don’t seem to Differentiate between algorithmic Centralized and crypto collateralized Stable coins in their taxonomy then Again they refer to another recent paper By the IMF which presumably Differentiates between these three Stablecoin types This is ultimately irrelevant as the Authors reiterate that the current Report concerns unbacked crypto assets Which includes basically every Cryptocurrency except stable coins They also say that Central Bank digital

Currencies or cbdcs are not unbacked Crypto assets even though they arguably Are according to the author’s own Definition Now when discussing the growth of Cryptocurrency the authors note that Quote although most crypto assets are Primarily designed to be used as a means Of exchange globally less than 30 000 Merchants except crypto assets as Payment Damn well I guess it’s game over then Pack it up folks only 30 000 Merchants Have adopted crypto in its short Lifespan even with this exponential Growth there’s no chance that Cryptocurrencies will catch up to Fiat Currencies the IMF said so In all seriousness the authors repeat That cryptocurrency does not pose a Threat to the current Financial system But they seem to be concerned about the Growing correlation between the stock Market and the crypto Market they Confirm that the increased correlation Between these two asset classes is due To institutional investment this is Something I’ve long suspected and it’s Crazy to get this confirmation in an IMF Report The authors also confirmed that crypto Adoption in emerging markets and Developing economies is much higher than In established markets and developed

Economies This is ironic given that the authors Claimed a few paragraphs earlier that Nobody in these countries is adopting Cryptocurrency which is it guys Anywho the first part of the imf’s Report covers the risks of Cryptocurrency and Regulatory responses To said risks The authors start by specifying that This section is about the risks within The crypto ecosystem this includes Crypto projects crypto companies and Blockchain Technology itself Regarding the issuance of Cryptocurrencies the authors admit that Quote decentralization makes it Difficult to design a regulatory Framework targeted at issuing entities The authors see this as a problem since Disclosure requirements cannot be Applied to unknown entities which is a Fair point in some cases The authors then accurately point out That some decentralized crypto projects Can still be centralized because of Their governance structures for Reference chain analysis recently found That one percent of token holders hold 90 of the voting power in most Decentralized autonomous organizations Not good The authors also take issue with the Critical information that’s often

Missing from cryptocurrency white papers This is another fair point so much so That we actually made a video about how To read cryptocurrency white papers you Can find that one down in the Description of course Next the authors give their suggestions For how countries should regulate the Issuance of cryptocurrencies First is to set standards for white Papers and the second is to create a Licensing regime to issue Cryptocurrencies The third suggestion caught my eye and That’s quote suitability tests here the Author’s note that Regulators should Consider restricting retail access to Certain cryptocurrencies just when you Thought the IMF was starting to sound Reasonable Now the fourth suggestion makes a lot More sense and that is to ensure that The marketing around crypto projects is Fair and accurate as someone who has Seen one too many shitcoin Advertisements in both London and Dubai I wholeheartedly agree that something Needs to be done there Regarding cryptocurrency exchanges the Authors take issue with the fact that They are easily accessible by retail Investors I mean God forbid that the Plebs get a chance to take on the risk Required to get rich am I right

Salty comments aside the authors do Rightfully point out that there should Probably be standards for the custody of Crypto assets on cryptocurrency Exchanges and let me take this as an Opportunity to remind you that you Should keep any crypto you’re not Actively trading in your personal crypto Wallet The authors also point out that many Crypto exchanges have a habit of going Offline when the crypto Market is Volatile and this is why you should Consider creating an account at multiple Crypto exchanges if most of your crypto Is held in your personal crypto wallet You can then send what you want to trade To the one that works big think Now what’s incredible is that the Authors even go as far as to mention That crypto exchanges have significant Influence on proof-of-stake blockchains Such as ethereum This comment actually made the crypto Headlines and rightfully so it is a Legitimate concern as they could Theoretically take control Given these and other facts the authors Provide the following suggestions for How countries should regulate Cryptocurrency exchanges First and foremost they suggest ensuring That crypto exchanges have clearly Defined governance structures you know

CEOs CFOs all that fun stuff The second suggestion again involves Considering whether crypto exchanges Should be accessible to retail investors At all The third suggestion is comparatively Less exciting as it’s all about ensuring Robust cyber security measures and all That boring but admittedly very Important stuff Now the fourth suggestion is to watch Crypto trading on exchanges closely and The fifth suggestion is to subject Cryptocurrency exchanges to lots of Transparency requirements to make this Observation possible The sixth suggestion is to impose strict Kyc and AML requirements as per the fat F’s Infamous crypto recommendations Which have done absolutely nothing to Reduce illicit Financial activity for Over 30 years more about that in the Description The seventh suggestion is to set Requirements for which crypto coins and Tokens can be listed this ties into the Eighth suggestion which is to make sure That there are no conflicts of interest Between crypto exchanges and listed Coins and tokens Now the last suggestion is essentially What I mentioned earlier and that’s to Require cryptocurrency exchanges to Apply extreme scrutiny to any crypto

Transactions coming from or going to Personal crypto wallets now regarding Crypto wallet providers the authors Finally specify that wallet providers Are third-party custodians usually Crypto exchanges logically the authors Call for strict security practice by So-called wallet providers including Keeping customer funds segregated and in Cold Storage when not in use This also happens to be the first Suggestion that the authors have for Countries looking to regulate wallet Providers The second suggestion is similar but Focuses on the software security of Crypto wallets rather than the physical Security of crypto wallets The third suggestion is to ensure crypto Wallet providers keep a detailed record Of all their customers crypto Transactions this relates to the fourth Suggestion which is again to comply with The fat F’s AML and kyc requirements The fifth suggestion is to subject Crypto wallet providers to reporting Requirements and the sixth is to ensure They have adequate safeguards in place This includes purchasing insurance for Their clients crypto assets something That companies like crypto.com have Already done respect to them for that The seventh suggestion is to set up Frameworks for quote wind down

Procedures in case a crypto wallet Provider fails this includes making sure That customer funds are safe and that The liquidation of cryptocurrencies by The crypto wallet provider doesn’t have Knock-on effects elsewhere in the Economy Last but not least the authors suggest Making sure that there is no conflict of Interest between wallet providers and Other entities they are interacting with This could create issues for Cryptocurrencies like Chronos and BMB Due to their close relationship with Crypto.com and binance respectively more About both cryptos in the description Now regarding crypto Mining and Validating the authors argue that public And permissionless blockchains are Superior to private and permissioned Blockchains they even go as far as to Argue that the private and permissioned Blockchains being built by big Tech and Big Banks pose a threat to financial Stability Bravo IMF Now as amazing as that is the authors Also note that there is no shortage of Risks associated with public and Permissionless blockchains such as 51 Attacks they’re also concerned about the Security of cross-chain bridges and Understandably so there has been no Shortage of cross-chain bridge hacks Recently now believe it or not but the

Authors are even concerned about the Fact that many cryptocurrencies use big Tech cloud storage to run many of their Nodes this is a very good point and Something that I covered in our video About the different layers of Decentralization in cryptocurrency Now unfortunately the authors then spoil Things a bit by claiming that crypto Mining will make it more difficult for Countries to meet their climate goals By now most of you will know that crypto Mining accounts for just 0.05 of global energy consumption and 0.08 of global carbon emissions still I Must salute the authors for Simultaneously acknowledging that proof Of stake though more environmentally Friendly could quote create excessive Concentration of decision-making powers On crypto exchanges and wallet Services Providers which may increase Market Integrity risks now regarding regulated Financial institutions that interact With cryptocurrency the authors call for The close monitoring of the direct and Indirect effects of such financial Institutions holding cryptocurrencies They admit that there is no need for Extreme Caution yet as these Institutions are not that exposed to Crypto however I couldn’t help but Notice the authors listed loans to Crypto users as one of the areas of

Concern this ties into the fat F’s theme Of labeling crypto related activities as High risk until they’ve killed the Industry in this case though I reckon There is cause for concern Moon boys do Exist after all Regarding off-chain transactions the Authors cautioned that the number of Such transactions in cryptocurrency is Growing this is significant because it Turns crypto exchanges so-called crypto Wallet providers and other such Intermediaries into significant players In the crypto ecosystem as such further Scrutiny is required since these crypto Intermediaries will effectively be Playing the role of exchange custodian Clearinghouse and transaction settler These roles are subject to strict Regulations in the traditional Financial System so crypto intermediaries should Be subject to the same The authors go on to discuss the Possibility of designating some of these Crypto intermediaries as systemically Important this is especially relevant to Stablecoin issuers which could become Significant players in both the Government debt market and the economy In general The authors say it’s unlikely that Crypto intermediaries will receive this Designation in most jurisdictions but I Wouldn’t hold my breath stablecoin

Issuers have been up to a lot lately and It looks like many of their tokens are On the brink of becoming de facto cbdc’s More about that in the description Anyhow the second part of the crypto Report talks about building a regulatory Architecture for cryptocurrency The authors start by revealing That Central banks governments and International authorities are looking Closely at crypto regulation no Surprises there The authors reiterate that crypto Regulation must be Global otherwise some Crypto projects will fall through the Cracks actual Financial Innovation will Occur and The Current financial system Will get wrecked that’s not what they Said but it’s what they meant The authors make sure to mention that The IMF recently called for crypto Regulations at the global level and go On to talk a bit about all the crypto Regulations that countries around the World are considering as expected they Mentioned the eu’s mica bill which we Recently covered video in description Now the authors go on to repeat that Banning crypto won’t work because it’s Likely there will be a few countries That refuse to fall in line the authors Also admit that banning crypto would Crush quote useful Financial innovation They then provide an eye-popping

Statistic and that’s the quote despite Strict domestic restrictions roughly 2 Million Egyptians reportedly hold crypto Assets Now this is the kind of stuff I Want to hear about IMF if you’re Watching next time do a report with only These kinds of statistics Jokes Aside the authors outline the five Steps that should be taken when putting Together crypto regulations these are Monitoring prioritization scope domestic Collaboration and the continuous Assessment of risks So when it comes to monitoring this Mostly involves quote assessing the size And composition of their domestic crypto Asset Market as well as user knowledge And behavior Prioritization is pretty straightforward As it involves assessing whether it’s Worth using limited regulatory resources On a country’s crypto industry relative To the risks it poses domestically Scope is somewhat less straightforward As it involves picking and choosing Which crypto entities to scrutinize Using subjective criteria such as risks To various entities including investors And institutions The authors also include crypto Education under the scope step because Well why not Domestic collaboration seems to be a not So subtle reference to the SEC and cftc

In the United States which are fighting Over who gets to regulate which aspects Of cryptocurrency The authors don’t seem to care about Such quarrels as they say the focus Should be around protecting Financial Stability now as for the continuous Assessment of risks the authors seem to Imply that Regulators should crack down On the crypto projects that do stuff They don’t like and let the useful ones Have a pass they literally admit that Technology neutrality probably won’t be Applied in practice by Regulators case In point quote authorities should be Confident in identifying where Particular types of Technologies might Challenge or support their objectives What’s reassuring is that the author’s Cautioned that the quote concept of same Activity same risk same regulation Doesn’t work in the context of Cryptocurrency this is a phrase I’ve Seen tossed around by a few International organizations like the World economic Forum so it’s reassuring That the authors disagree speaking of International organizations with way too Much influence and not enough Accountability the authors let the Readers know that quote the IMF can Leverage its Universal membership to Provide guidance and support to any Countries looking for help with their

Crypto regulations oh goody Now in the next section the authors Discuss the apparent unavailability of Crypto related data and how this could Impede crypto regulations they claim That crypto related data is quote often Unavailable or reliable but this is Debatable given that almost all crypto Transactions are publicly viewable This is not the case with crypto Intermediaries however and this seems to Be the angle the authors are taking here It’s not entirely clear though as they Seem to take issue with the fact that Transactions on bitcoin’s Lightning Network are harder to track On that note if you watched our video About the lightning Network you’ll know That this peculiar layer 2 has Surprising privacy properties especially After bitcoin’s Taproot upgrade I’ll Leave a link to that video in the Description Now what’s more is that the authors even Take issue with virtual private networks Or vpns now I vaguely recall reading About Regulators wanting to do away with Vpns in the context of cryptocurrency Because they want to be able to track Absolutely everything Next somewhat surprisingly the authors Seem to criticize the vagueness of the Howie test in this section for those Unfamiliar the Howie test is how the SEC

Decides which cryptocurrencies are Securities Cryptocurrencies deemed to be Securities Are almost guaranteed to be wrecked by Regulators in any case the authors are Correct in saying that there needs to be Some way of measuring what’s going on in Crypto markets domestically assessing How many people hold crypto which coins And tokens and how much they’re trading Is info that I’m sure everyone would Like to know Now this brings us to the conclusion of The report where the authors again Repeat that crypto regulations must Quote level the playing field on a Global scale To the crypto holders they say quote Regulation should not be seen as Stifling Innovation but rather as Building Trust If you watched our video about Blackrock’s pandemic predictions you’ll Know that this is a load of BS Financial Regulations are about centralizing the Financial system so that the people in Power can prevent their Fiat Ponzi Scheme from collapsing Never mind that crypto is supposed to be Trustless For what it’s worth though the authors Acknowledge that the antidote to crypto Adoption is for financial institutions To get their acts together so that

People start to trust them again I can’t Say I see any effort on the part of Financial institutions to do that Finally the authors reiterate that the FSB Financial stability board remember Not Russia’s Security Service obviously Will be heavily involved in setting Global standards for crypto regulation You can bet that we will be covering Those global standards when they come Out So this brings me to the big question And that’s what the imf’s crypto report Means for the crypto Market Well I’ll start by saying that the IMF Is becoming acutely aware of the pros And cons of cryptocurrency well if the Authors of this report are anything to Go by that is now this is as bullish as It is bearish because the more these International organizations understand Crypto the better they will be able to Coordinate in crushing certain projects And forcing others to integrate with the Existing Financial system As unclear as some parts of the report Were one thing is clear and that’s that Global crypto regulations of some kind Are coming the only question is when and Whether these Global crypto regulations Will be enforced in every country Something tells me that Global crypto Regulations won’t come until after the Next leg lower in the crypto Market

Which could have occurred by the time You see this video This is because Regulators need some new Justification for an aggressive crypto Crackdown then again it’s possible that We won’t see any significant crypto Regulations rolled out on a global scale Until after the next crypto bull market This is because governments and International organizations like the IMF Are slow and they also have much bigger Issues to deal with like big Banks going Bust for one When these Global crypto regulations do Inevitably come out though I think it’s Extremely unlikely that they will be Enforced in every country that’s simply Because the economic benefits of Regulatory Arbitrage will be too great Especially if retail investors continue To have access to the crypto Market I would say this has been the case over The last few years the jurisdictions That have embraced crypto have benefited Immensely this includes the creation of High-paying jobs no shortage of tax Revenue lots of economic activity and The snowball effect of other crypto Projects and companies coming in There is of course a risk that International organizations like the IMF Will create issues for the countries That choose to craft their own crypto Regulations but it looks like these

International organizations are quickly Falling out of favor there’s also a very Real bipolar world forming as you watch This video In some then the imf’s global crypto Regulations will be a double-edged sword For crypto and Society they will Increase institutional investment in Crypto while simultaneously suppressing True Financial innovation They will also increase crypto adoption But simultaneously increase Financial Centralization With luck the result will favor the Pro Decentralization Edge over the Pro-centralization edge but I am not Holding my breath after all there’s a Whole host of other Horrors coming like The carbon credit scores being pushed by These International organizations more About those down in the description And that’s all for today’s video about The imf’s recent crypto report if you Found it informative smash that like Button to let me know if you want to Make sure you don’t miss the next video Subscribe to the channel and ping that Notification Bell and if you’ve already Watched every video this channel has to Offer then head on over to coinbureau Clips for more crypto flicks or tune in To the coin Bureau podcast for in-depth Crypto discussions You can also follow me on Twitter tiktok

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