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Gopinath believes that enforcing a cryptocurrency prohibition will be difficult.

Gita Gopinath, chief economist at the International Monetary Fund (IMF),

on Wednesday stated that cryptocurrencies pose a threat to emerging economies that rely on capital controls and foreign exchange, and urged for a coordinated global response to regulate them, albeit a ban would be difficult to enact.

Gopinath, the IMF’s first deputy managing director-designate, urged countries to act fast, but acknowledged that a ban would be difficult to implement in practise. “Many exchanges operate outside of the United States and are therefore not regulated (of a country)… We require a global agreement because no single country can do it alone… and we require it now “she said at a National Council for Applied Economic Research (NCAER) lecture (NCAER).

She stated that crypto assets must be regulated, and that regulations should be devised depending on each country’s position, imposing restrictions comparable to those governing investments or payments, including capital buffers and other requirements for financial institutions investing in the instrument.

The administration is working on cryptocurrency legislation, which is expected to be introduced during the current Parliamentary session. The government is split on whether to regulate or prohibit it, with the RBI advocating against classifying it as an asset. Cryptocurrency acceptance is increasing in emerging markets, according to Gopinath.

According to Gopinath, the Indian government should retain its accommodative fiscal position for a few more quarters before progressively unwinding it. She also believed that monetary policy should remain liberal, despite the fact that the RBI, like other central banks, needed to keep a careful watch on inflation.

The Harvard University professor claimed that several countries, including India, were experiencing a K-shaped recovery, indicating that different segments of the economy were recovering at different rates. He also claimed that large companies were recovering faster than SMEs, and that several people had yet to return to the market.

She noted that, while the global economy has recovered from the Covid epidemic, the growth velocity has slowed in the second half of 2021.

In light of the predicted tightening of monetary policy in advanced nations, as well as the withdrawal of fiscal stimulus in some countries, as well as the increased threat of inflation, Gopinath urged that central banks communicate clearly in the event of a monetary policy shift. She also cautioned that countries have limited fiscal space to deal with potential disruptions caused by an outbreak of illnesses.

Gopinath advocated for a greater focus on infrastructure development, particularly in the health sector, and argued that developing countries should redouble their efforts in education because children in these countries have been negatively affected by the shift to virtual classrooms.

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