The IMF had previously stated that crypto assets could be used to escape capital control.
The International Monetary Fund (IMF) leadership has “generally agreed” that crypto assets should not be passed as legal tender. The group published their conclusion on February 23 after discussing a board paper on “Elements of Effective Policies for Crypto Assets.” The IMF Directors received the staff paper earlier this month, warning of the risks associated with crypto assets.
The dramatic rise and adoption of crypto have caused governments nationwide to consider developing guiding policies. While authorities put heads together to develop regulations, the sudden fall of many exchanges and the dramatic demise of some assets have heightened the call for crypto laws.
IMF Board “Generally Agreed” against Crypto Assets as Official Currency
In the press release announcing their opposition to crypto assets as a legal tender, the IMF board, which consists of 24 directors elected by the member countries, highlighted the nine elements listed in the paper. Notably, the elements represent a framework to help the board arrive at a policy response. The document focuses on monetary policy, financial stability, tax collection, and consumer protection.
The IMF executive board assessed the paper and acknowledged its “timeliness,” importance,” and relevance to all IMF member countries. The group said the increasing integration between crypto assets and the traditional financial system calls for a clear and concise response. Although crypto assets have benefits and uses, the Directors noted their risks. They are “macroeconomic risks, which encompass risks to the effectiveness of the monetary policy, capital flow volatility, and fiscal risks.” After weighing the impact of crypto assets on policies and how widespread adoption could lessen the effectiveness of the monetary policy, the IMF execs wrote concerning crypto assets:
“Directors generally agreed that crypto assets should not be granted official currency or legal tender status in order to safeguard monetary sovereignty and stability.”
While they oppose crypto assets being approved as an official currency, the IMF leadership discussed the importance of developing and applying clear regulations. The team believed that the framework must integrate the standard-setting bodies.
“Directors agreed that strict bans are not the first-best option, but that targeted restrictions could apply, depending on domestic policy objectives and where authorities face capacity constraints. A few Directors, however, thought that outright bans should not be ruled out. Directors noted that regulation should be mindful not to stifle innovation, and the public sector could leverage some of the underlying technologies of crypto assets for the public policy objectives.”
The IMF had previously stated that crypto assets could be used to escape capital control. This came as the Russia-Ukraine war made the headlines of many news stories. The Fund said it believed that many countries could use crypto to evade government-imposed capital controls. Hence, the board asked for a law amendment about foreign exchange and capital flow management measures to include crypto. The Fund constantly pushes for comprehensive crypto regulations.
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