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IMF chief economist says crypto could be challenging for emerging markets

Banning cryptocurrencies would pose a practical challenge for regulators due to the decentralized nature of digital currencies.

Image by: World Economic Forum / Flickr

Mon, 20 Dec 2021, 15:57 pm UTC

International Monetary Fund chief economist Gita Gopinath believes that dealing with the fast-growing crypto sector could be a challenge for emerging economies. While the crypto sector needs strong regulation, the IMF executive acknowledged that banning cryptocurrencies would pose a practical challenge for regulators due to the decentralized nature of digital currencies.

Gopinath aired her comments on Wednesday, December 15, at an event organized by the National Council of Applied Economic Research (NCAER), according to the Business Standard. It came at a time when the government is trying to pass a bill that will regulate the crypto industry.

The IMF chief economist gave an explanation on how crypto might potentially impact emerging economies. “I think cryptocurrencies are a particular challenge for emerging markets,” Gopinath said. “It would seem that cryptocurrencies are more attractive for emerging markets compared to developed economies. However, emerging markets have exchange rate controls, capital flow controls, and cryptocurrencies can impact that.”

The IMF chief economist also highlighted the need for regulation in the crypto sector. “Regulation is absolutely important for this sector,” Gopinath said. “If people are using this as an investment asset, then the rules which are there for other investment classes should apply here as well.”

However, she acknowledged that banning cryptos might be tricky for regulations as they are decentralized. She pointed out that a global policy on digital currencies is necessary.

Cryptocurrency regulation is a closely-followed topic among Indian investors as the government appears to favor banning digital currencies. The government listed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 for discussion Winter Session.

The proposed bill would prohibit private cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) in India. However, the Union Cabinet did not take up the bill for consideration on Wednesday and with the Winter Session ending on December 23, the possibility of it being tabled in Parliament is unlikely.

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