IMF-FSB paper aims for crypto payment data by end 2025, says total ban tough to enforce

India has been pushing hard to reach a global consensus on minimum common regulations for crypto.

Global financial organisations are looking to collect detailed "test" data on crypto used in making payments by the end of 2025, according to a joint synthesis paper by the International Monetary Fund (IMF) and the Financial Stability Board (FSB).

"The expected outcome is to have, by Q4 2025 (October-December 2025), test estimates of flows and stocks of crypto-assets used as means of payments broken down by type, sector, and counterpart country," the synthesis paper, released on September 7, said.

The synthesis paper was submitted to the G20 members and discussed at the meeting of finance deputies in New Delhi ahead of the Leaders' Summit on September 9-10.

The paper, written by IMF and FSB at the request of the Indian G20 Presidency, contains policy recommendations and standards to help authorities address the macroeconomic and financial stability risks posed by crypto-asset activities and markets, including those associated with stablecoins and those conducted through decentralised finance. While it describes how the policy and regulatory frameworks developed by the IMF and the FSB fit together, it does not establish new policies or recommendations.

Common regulations

What the paper does contain is an 'implementation roadmap' for the implementation of crypto-asset policy frameworks. One of these relates to data on crypto transactions.

"The growing presence of new forms of crypto-assets used as a means of payment poses various potential challenges for data collection and analysis such as cross-border usage and currency substitution. Rapid cryptoisation can have an impact on the monetary independence and financial stability of economies. Yet, the data to measure crypto-assets, and their impact are scarce," the paper noted.

India, which has led calls for a set of minimum common regulations for crypto, has previously highlighted the need to have data on crypto before putting in place any laws controlling them. In December 2022, Reserve Bank of India Deputy Governor T Rabi Sankar had said initiatives to gather data on crypto must be undertaken quickly before any regulations are formed so that "wrong set of prescriptions" are not issued.

"Making regulations in absence of adequate information carries a very high probability of we actually ending up with the wrong set of prescriptions," Rabi Sankar, a strident critic of private cryptocurrencies, had said.

As per the synthesis paper, the IMF will be the organisation responsible for collecting the data and will partner with industry players to gather data on crypto-assets as payment methods.

"These discussions within the G20 could also facilitate collaboration of statistical agencies with regulatory bodies to influence regulations regarding data requirements for cryptoassets," the paper added.

Blanket ban difficult

Any crypto regulations, if agreed at the Leaders' Summit, will be a lasting legacy of the Indian Presidency. While the Indian government has been keen to develop an international consensus on the matter, the RBI has publicly voiced its opposition to crypto and called for its complete ban.

However, the IMF-FSB synthesis paper warned that a "blanket" ban on crypto activity would be difficult to enforce.

"Blanket bans that make all crypto-asset activities (e.g., trading and mining) illegal can be costly and technically demanding to enforce. They also tend to increase the incentives for circumvention due to the inherent borderless nature of crypto- assets, resulting in potentially heightened financial integrity risks, and can also create inefficiencies," the paper said, going on to add that a ban in just one jurisdiction could also lead to activity shifting to other regions, creating spillover risks.

"A decision to ban is not an 'easy option' and should be informed by an assessment of money laundering and terrorist financing risks and other considerations, such as large capital outflows and other public policy aims," it said.

The synthesis paper also listed a detail policy implementation roadmap for various aspects. These include the integration of crypto-asset policies by the IMF into its Article IV assessments and Financial Sector Assessment Program, an outreach programme through IMF regional training centres, and the IMF and World Bank to integrate recommendations for a comprehensive framework for cryptoassets as part of technical assistance and capacity building. All these three have to implemented within 8-12 months.