Title page
FINTECH NOTE
Regulating the Crypto Ecosystem
The Case of Unbacked Crypto Assets
Prepared by Parma Bains, Arif Ismail, Fabiana Melo, and Nobuyasu Sugimoto
September 2022
Copyright Page
©2022 International Monetary Fund
Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets
NOTE/2022/007
Parma Bains, Arif Ismail, Fabiana Melo, and Nobuyasa Sugimoto*
DISCLAIMER: Fintech Notes offer practical advice from IMF staff members to policymakers on important issues. The views expressed in Fintech Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
RECOMMENDED CITATION: Bains, Parma, Arif Ismail, Fabiana Melo, and Nobuyasa Sugimoto. 2022. “Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets.” IMF Fintech Note 2022/007, International Monetary Fund, Washington, DC.
| ISBN: | 979–8-40022–136-1 (Paper) 979–8-40022–158-3 (ePub) 979–8-40022–161-3 (PDF) |
| JEL Classification Numbers: | D18, E26, E42, F31, G28, G18 , O30 |
| Keywords: | Crypto; crypto asset; cryptocurrency; blockchain; stablecoin; DLT; regulation; Economic sectors; Emerging technologies; Financial crises; Financial sector policy and analysis; Financial sector stability; Financial services; Fintech; Systemic risk; Technology |
| Authors’ email addresses: | PBains@imf.org AIsmail@imf.org FMelo@imf.org NSugimoto@imf.org |
| ISBN: | 979–8-40022–136-1 (Paper) 979–8-40022–158-3 (ePub) 979–8-40022–161-3 (PDF) |
| JEL Classification Numbers: | D18, E26, E42, F31, G28, G18 , O30 |
| Keywords: | Crypto; crypto asset; cryptocurrency; blockchain; stablecoin; DLT; regulation; Economic sectors; Emerging technologies; Financial crises; Financial sector policy and analysis; Financial sector stability; Financial services; Fintech; Systemic risk; Technology |
| Authors’ email addresses: | PBains@imf.org AIsmail@imf.org FMelo@imf.org NSugimoto@imf.org |
Contents
Acronyms/Glossary
Executive Summary
Introduction
Taxonomy and Scope
The Growth of Crypto Assets
I. The Crypto Ecosystem: Risks and Regulatory Responses
Issuers
Crypto Asset Exchanges
Wallet Providers
Validators, Miners, and Underlying Technology
Regulated Financial Institutions
Multiple Functions and Market Infrastructure
II. Building a Regulatory Architecture
Considerations for Regulatory Frameworks across Crypto Assets
■ Monitoring
■ Prioritization
■ Scope
■ Domestic Collaboration
■ Continuous Assessment of Risks
Considerations for Data Availability
Conclusions
References
BOXES
1. Regulating Crypto Asset Promotions
2. Critical Service Providers
3. Approaches to Unbacked Crypto Asset Regulation
FIGURES
1. A Taxonomy of Crypto Assets, NFTs, and CBDCs and Scope of this Note
2. The Growth of Crypto Assets by Market Capitalization
TABLE
1. Recommendations for Prudential and Conduct Regulation of the Crypto Ecosystem: Unbacked Crypto Assets
Acronyms/Glossary
| AML | Anti–Money Laundering |
| BCBS | Basel Committee on Banking Supervision |
| BFA | Bali Fintech Agenda |
| CFT | Combating the Financing of Terrorism |
| CBDC | Central Bank Digital Currency |
| CPMI | Committee on Payments and Market Infrastructure |
| DeFi | Decentralized Finance |
| DLT | Distributed Ledger Technology |
| FCA | Financial Conduct Authority (UK) |
| FATF | Financial Action Task Force |
| FMI | Financial Market Infrastructure |
| FSB | Financial Stability Board |
| IOSCO | International Organization of Securities Commissions |
| NFT | Non-Fungible Token |
| SSB | Standard Setting Body |
| VPN | Virtual Private Network |
The authors would like to thank Tobias Adrian for his guidance, and Marina Moretti, Agnija Jekabsone, and Cristina Cuervo for their comments and contributions to this note.