Crypto should not be given official currency, legal tender status – IMF
The International Monetary Fund (IMF) has warned that giving cryptocurrencies legal tender or official currency status could adversely affect a nation’s monetary sovereignty and stability.
Announced on February 23, “Elements of an effective policy for crypto assets.”
The IMF said granting a cryptocurrency official or legal tender status could also lead to financial stability issues. Such a move would increase traditional financial institutions’ adoption and exposure to these volatile assets, significantly increasing their risk profile.
The IMF recommends that if a state gives a cryptocurrency such status, the government should minimize its use for public payments and ensure the conversion of cryptocurrencies into fiat currencies to prevent volatility problems. said it should be avoided. Government revenues are quoted in cryptocurrencies and are subject to large fluctuations when state-owned enterprises handle operations, he added.
The IMF said the lack of credible domestic institutions and policies is a nation’s first line of defense when it comes to monetary stability, and weakness here often leads people to convert fiat currencies into foreign currencies. rice field. This problem is exacerbated by the advent of cryptocurrencies as more and more people convert untrusted fiat currencies into cryptocurrencies compared to other fiat currencies such as dollars and euros.
The IMF speculates that the best way to reduce the substitution of fiat currencies for crypto assets is to build stronger institutions and craft robust policies that strengthen trust in traditional systems. Creating a prudent Monetary Policy Framework (MPF) is the first step to ensuring credibility.
He added that the MPF needs to be transparent, coherent and coherent to ensure that the public understands the policies and their implications.
The IMF said this would help “fix market expectations, curb currency substitution and ensure the effectiveness of monetary policy.”
The paper highlights eight other points that sovereign states and their central banks should consider for effective policymaking and regulation of cryptocurrencies.
It urged Member States to prevent excessive capital flows and to properly manage capital flows through effective measures. The IMF said the risks posed by crypto-assets should be analyzed regularly and the taxation of such assets should be “clear.”
The IMF also said countries should establish “legal certainty” regarding crypto assets and proactively address risks where appropriate. In addition, countries should establish a joint framework among institutions to ensure timely and effective regulation of the sector.
The last three elements focus on strengthening global cooperation between regulators and sovereigns. The IMF said countries should monitor how crypto assets are affecting other economies.
The IMF called for global cooperation in developing digital infrastructure and alternative solutions to improve cross-border payments.
