The IMF in its Global Financial Stability Report spoke about the potential use of crypto in the Russian war against Ukraine. They have expressed that there is a threat poses to the stability of the existing financial systems. 

According to IMF, “There has been an increased level of “cryptoization” of the global financial system amid the Ukrainian invasion by Russia and the COVID-19 pandemic.

IMF Report By Block

The Block reported that although much of this is due to general trading activity, the IMF warned that it could be used to circumvent identification checks in capital flows. This is essential, a means of anonymously transacting overseas.

Although the US and UK regulators have asked crypto firms to be vigilant. However, people may use non-compliant exchanges, mixers or other means to evade sanctions.

In order to tackle crypto-specific risks, the IMF has advised international governments to implement the Financial Action Task Force standards. These standards include a travel rule for crypto assets that require exchanges to transmit sender and recipient identification information. Also implementation of additional laws and regulations on foreign exchange and capital flow management to cover crypto.

The report stated that “essential steps include developing a comprehensive, consistent, and coordinated regulatory approach to crypto assets, and applying it effectively to capital flow management measures; establishing international collaborative arrangements for implementation; addressing data gaps; and leveraging technology (“regtech and’ suptech”).”

Related: Problems Mounting For El Salvador After Legalizing Bitcoin

Other Aspect of the Report

The other aspect of the report spoke about decentralised finance (DeFi) space. It called the sector a new form of intermediary which poses a new set of legal questions that regulators need to tackle – importantly, how to regulate an entity that lacks a centralized point of contact.

“Regulation should focus on elements of the crypto ecosystem that enable DeFi, such as stablecoin issuers and centralized exchanges,” the report suggested. “Authorities should also encourage DeFi platforms to be subject to robust governance schemes, including industry codes and self-regulatory organizations. These entities could provide an effective conduit for regulatory oversight.”

In a similar report from January this year, the IMF showed concerns about the risks related to El Salvador’s issuance of bitcoin-backed bonds.

News reported that the IMF urged El Salvador to terminate bitcoin as legal tender as soon as possible.

The financial institution pointed to the high price volatility of Bitcoin as a major risk. Also, the report says that bitcoin should not be considered legal tender.

In June last year, El Salvador became the first country to adopt bitcoin as legal tender. To become a legal Tender El Salvador got 62 votes of approval out of 84. In September, Bitcoin officially was circulated in this country as legal tender.

Read More: Cryptoassets Use in Ukraine War under Scrutiny by Global Regulators: Reuters

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In an official announcement, the UK-based banking company, Standard Chartered said that they will be joining the Global Digital Finance, or GDF, Patron Board. Now the bank will also join forces with other blockchain-based companies and organizations to promote the use of cryptocurrencies. It will also up its efforts to make local and international lawmakers make crypto-friendly regulations. 

GDF, in its statement, confirmed that Standard Chartered is the first bank to join the group’s patron board. It has ten members including Coinbase, Huobi, SIX Digital Exchange, and 100x Group which is also the parent company of BitMEX.

“Thoughtful adoption of digital assets based on the principles of consumer protection and compliance can promote a more efficient and inclusive financial system,” said Standard Chartered’s global head of financial markets electronics trading and platforms Geoff Kot. 

“Banks have an ongoing responsibility to support the evolution of an open and trusted global financial architecture.”

The group was initially launched back in 2018. Its members have been actively vying for greater adoption of cryptocurrencies. With Standard Chartered Bank as its patron board member, it will only get stronger. It also shows the group is committed and expanding.

“As institutional adoption of digital assets rapidly evolves, we must ensure there is the highest level of industry-wide best practices and standards in place, aligned to emerging policy and regulation thinking and development,” said GDF executive co-chair Lawrence Wintermeyer. “GDF and our members are at the forefront of creating these standards in a shared engagement forum with market participants, policymakers, and regulators.”

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