Capital Flow Management Measures in the Digital Age: Challenges of Crypto Assets

FinTech Notes, May 10, 2022

Source details

Canonical URL

Capital Flow Management Measures in the Digital Age: Challenges of Crypto Assets

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Dong He, Annamaria Kokenyne, Xavier Lavayssière, Inutu Lukonga, Nadine Schwarz, Nobuyasu Sugimoto, Jeanne Verrier
• Published: May 10, 2022
• Series: FinTech Notes
• DOI: https://doi.org/10.5089/9798400205880.063

Overview and purpose

• Examines how crypto assets could affect the effectiveness of capital flow management measures (CFMs) from a structural and longer-term perspective.
• Emphasizes that CFMs typically rely on financial intermediaries verifying transaction nature and transacting-party identities, a practice challenged by crypto assets.

Core findings on challenges posed by crypto assets

• Crypto assets have become a significant instrument for payments and speculative investments in some countries.
• Crypto assets can be traded pseudonymously and held without identification of the residency of the asset holder.
• Many crypto service providers operate across borders, complicating supervision and enforcement by national authorities.
• Gaps in legal and regulatory frameworks compound the challenges posed by crypto-asset attributes.
• These features undermine standard CFM implementation mechanisms that depend on identity and residency verification by intermediaries.

Policy implications and recommended strategy

• Preserve the effectiveness of CFMs against crypto-related challenges through a multifaceted strategy that includes:
  • Clarifying the legal status of crypto assets and ensuring that CFM laws and regulations cover them.
  • Devising a comprehensive, consistent, and coordinated regulatory approach to crypto assets and applying it effectively to CFMs.
  • Establishing international collaborative arrangements for supervision of crypto assets.
  • Addressing data gaps and leveraging technology (regtech and suptech) to create anomaly-detection models and red-flag indicators that will allow for timely risk monitoring and CFM implementation.

Subjects and topical focus

• Balance of payments
• Central banks
• Crime
• Economic sectors
• Financial crises
• Technology

Keywords (as provided)

• Anti-money laundering and combating the financing of terrorism (AML/CFT)
• asset holder
• Bitcoin
• Blockchain and DLT
• Capital flow management
• capital flow management measures
• Capital flows
• capital outflow restriction
• CFMs
• crypto asset Adoption
• crypto assets
• crypto exchanges
• crypto-asset exchange
• digital currencies
• distributed ledger technology
• FINTECH note
• Global
• Regtech
• Suptech
• untraceable transactions
• Virtual currencies

Content in this bundle

• Capital Flow Management Measures in the Digital Age: Challenges of Crypto Assets
  • Capital Flow Management Measures in the Digital Age: Challenges of Crypto Assets (Markdown version)
  • Capital Flow Management Measures in the Digital Age: Challenges of Crypto Assets (PDF)