Gita Gopinath – Chief Economist for the International Monetary Fund – recently said that developing economies should refrain from banning crypto. Instead, she called global regulation of the industry “the need of the hour”.
The Global Challenge of Crypto
Gopinath outlined the regulatory difficulties around crypto at an event by the National Council of Applied Economic Research (NCAER) on Wednesday. She said that global policy on crypto is an urgent need to address the challenges the technology poses to emerging markets.
Moreover, she said banning them was simply impractical, given the global presence that exchanges possess.
“Regulating crypto assets and currencies is essential, especially for emerging and developing economies, as banning them may not work as crypto exchanges are located offshore, which makes it easier for an individual to trade in them despite the ban,” she said.
This September, China announced a ban on all crypto exchanges from the country, after which exchanges such as Bitmart and Biki fled the country. Meanwhile, India is still deliberating over an equivalent ban.
Gopinath placed emphasis on making a ‘global’ policy around crypto, as cross-border transactions make any single nation’s regulations against it quite weak. They can be used to evade “exchange rate controls, capital controls, and capital flow measures,” she said.
Michael Saylor – CEO of MIcroStrategy, the world’s largest owner of Bitcoin – has highlighted this exact property as extremely helpful from a business perspective. Unlike real estate, Bitcoin can be transferred across borders at “the speed of light” to the most tax-friendly jurisdictions.
Christine Lagarde – President of the European Central Bank – has also pushed for global cryptocurrency regulation, to combat its decentralized “money laundering” capabilities.
Regulation Over Banning
Besides India and China, most other jurisdictions have ruled out banning cryptocurrencies, instead taking a regulatory approach. In fact, many US officials see China’s ban as an excellent opportunity to welcome the industry, capitalizing on its innovation. These include Ted Cruz, Hester Peirce, and Pat Toomey, among others.
Singapore has also chosen not to ban. MAS director Ravi Menon believes crypto could “lead to a very good outcome for the economy and society,” and would rather craft a regulatory framework for it to operate within.