IMF Doesn't Want Bitcoin in The Bowels of Financial System

Friday, 24/02/2023 | 08:40 GMT by Arnab Shome
  • The IMF asks countries not to give legal tender status to cryptocurrencies.
  • It published a paper with nine-point recommendations.
IMF
Reuters

The International Monetary Fund (IMF) published a nine point-action plan discussing policies around crypto assets and recommending countries not to give them legal tender status.

IMF Recommends against Bitcoin's Legal Tender Status

"Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status," the first among the nine points in the recommendations noted.

The international lender's Executive Board prepared the paper, "Elements of Effective Policies for Crypto Assets," to provide guidance to IMF member countries regarding policies on crypto assets.

Regulations around Bitcoin and other crypto assets have become a priority globally. Most countries are struggling to draft effective policies around crypto assets that are decentralized in nature. However, El Salvador became the first country to give Bitcoin legal tender status in late 2021, which was a move that the Central African Republic later followed.

The IMF earlier criticized the move of the two countries in labelling Bitcoin as a legal tender, along with their fiat currencies. It even urged the government of El Salvador to scrap its initiative to call Bitcoin a legal tender.

Many Recommendations around Crypto

The other points of the paper recommend that countries build a guard against "excessive capital flow volatility" and maintain the "effectiveness of capital flow management measures." In addition, the distressed lender urged members to analyze and disclose the financial risks and "adopt unambiguous tax treatment" of crypto assets.

On top of that, the Washington DC-headquartered organization recommends countries establish legal certainty of crypto assets and "develop and enforce prudential, conduct, and oversight requirements to all crypto market actors."

Establishing a joint monitoring framework, international collaborative arrangements, strengthening global cooperation, and monitoring the impacts of crypto assets on the stability of the international monetary system are the last remaining recommendations of the IMF.

"By adopting the framework, policymakers can better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation associated with it," the paper added.

While the IMF maintained its strong stance against Bitcoin as money, its Head believes that central bank digital currencies (CBDCs) are the most reliable form of digital money. Further, IMF's MD, Kristalina Georgieva, earlier branded virtual currencies as 'de-facto assets', not backed by assets that enable price stability.

The International Monetary Fund (IMF) published a nine point-action plan discussing policies around crypto assets and recommending countries not to give them legal tender status.

IMF Recommends against Bitcoin's Legal Tender Status

"Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status," the first among the nine points in the recommendations noted.

The international lender's Executive Board prepared the paper, "Elements of Effective Policies for Crypto Assets," to provide guidance to IMF member countries regarding policies on crypto assets.

Regulations around Bitcoin and other crypto assets have become a priority globally. Most countries are struggling to draft effective policies around crypto assets that are decentralized in nature. However, El Salvador became the first country to give Bitcoin legal tender status in late 2021, which was a move that the Central African Republic later followed.

The IMF earlier criticized the move of the two countries in labelling Bitcoin as a legal tender, along with their fiat currencies. It even urged the government of El Salvador to scrap its initiative to call Bitcoin a legal tender.

Many Recommendations around Crypto

The other points of the paper recommend that countries build a guard against "excessive capital flow volatility" and maintain the "effectiveness of capital flow management measures." In addition, the distressed lender urged members to analyze and disclose the financial risks and "adopt unambiguous tax treatment" of crypto assets.

On top of that, the Washington DC-headquartered organization recommends countries establish legal certainty of crypto assets and "develop and enforce prudential, conduct, and oversight requirements to all crypto market actors."

Establishing a joint monitoring framework, international collaborative arrangements, strengthening global cooperation, and monitoring the impacts of crypto assets on the stability of the international monetary system are the last remaining recommendations of the IMF.

"By adopting the framework, policymakers can better mitigate the risks posed by crypto assets while also harnessing the potential benefits of the technological innovation associated with it," the paper added.

While the IMF maintained its strong stance against Bitcoin as money, its Head believes that central bank digital currencies (CBDCs) are the most reliable form of digital money. Further, IMF's MD, Kristalina Georgieva, earlier branded virtual currencies as 'de-facto assets', not backed by assets that enable price stability.

About the Author: Arnab Shome
Arnab Shome
  • 6425 Articles
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About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6425 Articles
  • 85 Followers

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