With no globally agreed upon international unified regulatory body, the current state cryptocurrency is leaving a distinctly divided landscape. This bifurcation would further entrench the Global North/South economic divides. Not everyone is convinced—a few stakeholders have been advocating for a more global regulatory structure. There is increasing worry that this new framework might fall under the sway of the Global North, similarly to various international financial institutions such as the IMF. This would abrogate the autonomy of central banks in developing countries.
The IMF, an international financial institution with considerable influence over the global economy, operates on a voting power system proportional to member states' financial contributions. Importantly, the United States is the single largest contributor, and as such has about 18 percent of the total voting power. This is important because the IMF’s decisions require an 85 percent supermajority. This centrality requirement effectively grants the United States a veto power.
The above structure, critics say, allows the Global North—particularly the United States—to hold disproportionate and excessive power over IMF policy. They argue that this influence perverts the policies to serve U.S. interests almost entirely. There is increasing concern that any prospective international crypto regulator would operate under a like structure, deepening existing power dynamics. The framework of a new international cryptocurrency regulator is unlikely to deviate from existing bodies dominated by the viewpoints and policies of the Global North.
From the uncertainty these policy gaps create, there is a risk but some opportunity. Without a centralized international standard, each nation gets to call their own shots and develop their regulations accordingly. All countries in the Global North and Global South should be able to create agencies that best serve their contexts. This would better promote innovation and enable more tailored, flexible solutions to meet the specific needs of each country’s starting conditions.
This decentralized approach carries risks. The Global North, with its greater resources and technological expertise, is likely to lead the way in developing sophisticated regulatory frameworks, potentially leaving the Global South behind. It risks leaving many developing countries behind. They might find it difficult to stay ahead of the rapid developments in crypto and fintech more broadly.
The conflict over regulation of cryptocurrency is just a symptom of the deeper struggle over how economic power is, and will be, used in the next global financial system. Some worry that a new, globally dominated regulatory body will reinforce existing inequalities, harming the central bank autonomy in developing nations. There are those who say that we need a coordinated national strategy to end these illegal campaigns. This strategy is vital to prevent instability from spreading to the crypto market.
The former United States President Donald Trump once described cryptocurrency as:
“highly volatile” and “based on thin air” - Donald Trump
Absent a clear, unifying cryptocurrency regulatory institution, Global North and Global South countries will continue to develop in vastly different manners. Each can create their own rules and regulatory and enforcement agencies that best serve their specific interests. Without strong countervailing forces, the Global North will prevail in their formation and otherwise entrench these new regulatory institutions, exacerbating existing inequalities in access and benefits. The International Monetary Fund (IMF) does not have a mandate to directly regulate cryptocurrencies. Yet, it’s had an outsized impact on the global financial system.
Without a multilateral cryptocurrency regulatory institution, Global South developing countries risk being left in the dust. That gap may increase in coming years as new fintech innovations play catch-up. The International Monetary Fund (IMF) is one of the most powerful international financial institutions, whose decisions disproportionately impact the global economy. The IMF’s system of voting power corresponds to their member states’ financial contributions, paid every year. The United States has a lot of voting power in the IMF thanks to its large contributions, financial and otherwise. The IMF's decisions require a supermajority, which gives the United States a significant amount of influence over the institution's decisions.
