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Mr. Dong He, Annamaria Kokenyne, Xavier Lavayssière, Ms. Inutu Lukonga, Nadine Schwarz, Nobuyasu Sugimoto, and Jeanne Verrier
Capital flow management measures (CFMs) can be part of the broader policy toolkit to help countries reap the benefits of capital flows while managing the associated risks. Their implementation typically requires that financial intermediaries verify the nature of transactions and the identities of transacting parties but is facing the rising challenge of crypto assets. Indeed, crypto assets have become a significant instrument for payments and speculative investments in some countries. They can be traded pseudonymously and held without identification of the residency of the asset holder. Many crypto service providers operate across borders, making supervision and enforcement by national authorities more difficult. The challenges posed by the attributes of crypto assets are compounded by gaps in the legal and regulatory frameworks. This paper aims to discuss how crypto assets could impact the effectiveness of CFMs from a structural and longer-term perspective. To preserve the effectiveness of CFMs against crypto-related challenges, policymakers need to consider a multifaceted strategy whose essential elements include 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.
Mr. Dong He, Annamaria Kokenyne, Xavier Lavayssière, Ms. Inutu Lukonga, Nadine Schwarz, Nobuyasu Sugimoto, and Jeanne Verrier

implementation; addressing data gaps and leveraging technology (regtech and suptech) to allow for timely risk monitoring; and striking a good balance between ex ante and ex post enforcement. A. Strengthening Legal and Regulatory Frameworks Regulatory and supervisory frameworks for crypto assets will need strengthening in order to minimize regulatory arbitrage, which is a key channel for circumventing CFMs. Efforts include clarifying the legal framework and reviewing CFM regulations against challenges of crypto assets; developing a consistent taxonomy of crypto assets

Mr. Dong He, Annamaria Kokenyne, Xavier Lavayssière, Ms. Inutu Lukonga, Nadine Schwarz, Nobuyasu Sugimoto, and Jeanne Verrier

Developing for persons and entities engaged in crypto activities and services a comprehensive, consistent, and coordinated regulatory framework 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 Contents I. Introduction II. An Overview of CFMs III. How Crypto Assets Can Be Used to

International Monetary Fund, World Bank, International Monetary Fund. Strategy, Policy, &, Review Department, and International Monetary Fund. Legal Dept.

International Association of Insurance Supervisors IMS International Monetary System IOSCO International Organization of Securities Commissions IT Information Technology KYC Know-Your-Customer ML/TF Money Laundering and Terrorist Financing MSME Micro, Small-, and Medium-Sized Enterprises NPPS New Payment Products and Services Regtech Regulatory Technology Suptech Supervisory Technology SSB Standard-Setting Body Contents INTRODUCTION

Mr. Ashraf Khan and Majid Malaika

. Areas of Financial Supervision in which Suptech Applications are Used 11. National Bank of Georgia: Outline of OpenRegulation 12. National Bank of Georgia: OpenRegulation—Legal Updating Process 13. Cash Currency and CBDC—Transfer of Possession 14. Countries Where Retail CBDC is Being Explored 15. Digital Risks to IT Systems 16. Fintech and Central Bank Operational Resilience 17. Cyber Risk Management 18. Fintech and Central Bank Risk Management—Example of a Risk Matrix Tables 1. Example: IMF TA Recommendations on Central Bank Risk Management, 2

International Monetary Fund. Monetary and Capital Markets Department

for Financial Market Infrastructure PHE Public Housing Estate PoC Proof-of-Concept PSSVFO Payment Systems and Stored Value Facilities Ordinance RegTech Regulatory Technology RPA Robotic Process Automation SFC Securities and Futures Commission SFO Securities and Futures Ordinance SME Small- and Medium-sized Enterprise SPM Supervisory Policy Manual SupTech Supervisory Technology SVF Stored Value Facility TN Technical Note TSP Third-party Service Provider UHC

International Monetary Fund and World Bank

NPPS New Payment Products and Services OIC Organization of Islamic Conference P2P Peer-to-Peer PIC Pacific Island countries PNG Papua New Guinea PoC Proofs of concept PSD2 Payments Services Directive 2 PSP Payment Service Providers QR Quick Response Regtech Regulatory Technology STO Securities Token Offerings Suptech Supervisory Technology SSB Standard-Setting Body

International Monetary Fund. Monetary and Capital Markets Department, International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Legal Dept., and International Monetary Fund. Research Dept.

Technology E-Money Electronic Money FATF Financial Action Task Force FSB Financial Stability Board GSC Global Stablecoin ICO Initial Coin Offering IMS International Monetary System IMF International Monetary Fund OECD Organization for Economic Cooperation and Development RegTech Regulatory Technology SupTech Supervisory Technology