The International Monetary Fund (IMF) believes a proof-of-stake approach might give crypto exchanges and wallet providers too much choice-making power

The International Monetary Fund (IMF) believes a proof-of-stake approach might give crypto exchanges ...

The International Monetary Fund (IMF) has published a paper highlighting certain issues related to the Proof-of-Stake approach to blockchain infrastructure, as well as proposing a regulatory framework that would reduce global risks of digital assets. With this technology, cryptocurrency investors can stake their coins, which allows them to examine new blocks of transactions and add them to the blockchain.

Despite the energy savings, the IMF''s newly published paper demonstrates how PoS "could construct an excessive quantity of decision-making powers on crypto exchanges and wallet services, which might increase market integrity risk."

Owners of a cryptocurrency can stake coins and create their own validator nodes thanks to the PoS model. Staking is when you pledge your coins to be used to verify transactions. Your coins are locked up while you stake them, but you may untake them if you want them.

When a block of transactions is ready to be processed, the cryptocurrency''s proof-of-stake protocol will select a validator node to review the block. The validator checks if the transactions in the block are accurate.

According to the paper, regulators should adopt a "technology-neutral approach" but should "consider the regulatory implications of different forms of technology," as "certain types of consensus mechanisms that support blockchains may inherently generate frictions with larger policy objectives and mandates." Adding that a "technology-neutral approach may not be viable in the future."

The IMF paper was published alongside another paper on regulating stablecoins urging the Financial Stability Board (FSB) to begin and lead global initiatives on crypto regulation. According to the reports, the watchdog is "proficient in the ability to take the lead in coordinating and establishing global standards to support national regulation of crypto assets, as well as guiding the national implementation of the regulatory regulatory.

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