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Regulation of Crypto Assets (IMF Fintech)

Research paperIMF FintechDecember 201927 pages41 min readOriginal source
Key number
$41 million
Bitcoin Stolen in Binance Cyberattack p.26
Largest segment
64%
Regulators Identifying Crypto Framework Gap p.20
What changed
30%
Regulators Who Modified Framework for Crypto Assets p.20

Summary

  • In May 2019, major crypto exchange Binance suffered a cyberattack resulting in $41 million in Bitcoin being stolen.p.26
  • Digital asset exchange Cryptopia lost $16 million in January 2019, while exchanges CoinBene and DragonEx lost a combined $46 million worth of Ethereum-based tokens in March 2019.p.26
  • Investors in QuadrigaCX were unable to access approximately $190 million in client assets after its founder passed away in December 2018.p.26
  • An analysis of 3,291 crypto asset white papers revealed that 16% showed signs of plagiarism, identity theft, or promises of implausible returns.p.26
  • A global fintech survey showed that 64% of responding regulators identified a gap in their framework regarding crypto assets, while 30% had modified their frameworks.p.20

Key insights

  1. The IMF/World Bank Bali Fintech Agenda outlines 12 core policy elements, including financial sector resilience and addressing emerging fintech risks.p.8
  2. Because many crypto assets lack tangible backing, their price discovery mechanisms remain weak and highly vulnerable to market manipulation like wash trades.p.5
  3. Anonymity-enhancing features and decentralized networks complicate the ability of law enforcement to trace criminal proceeds and enforce AML/CFT standards.p.5
  4. Operational and cybersecurity breaches at wallet providers and trading platforms pose severe risks of investor asset loss without traditional safety nets like deposit insurance.p.3
  5. Significant data gaps concerning leverage in crypto markets and direct or indirect exposures of financial institutions hinder global systemic risk assessments.p.14
  6. France established an optional visa regime for crypto asset offerings under its Loi PACTE framework for assets that do not qualify as traditional securities.p.20
  7. The Financial Action Task Force updated its standards in 2018 and issued binding guidance in June 2019 for virtual asset service providers.p.17
  8. Given the cross-border and cross-sector nature of crypto activities, international coordination is necessary to prevent regulatory arbitrage.p.9

Topics and entities

FranceGlobalSwitzerlandBankingCrypto and stablecoinsCybersecurityRegulationAutorité des Marchés FinanciersBasel Committee on Banking SupervisionBinanceBitfinexFinancial Action Task ForceFinancial Stability BoardInternational Organization of Securities CommissionsJPM CoinLibraQuadrigaCXSwiss Financial Market Supervisory Authority

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