Crypto news alerts: The IMF advises against making cryptocurrencies legal tender. The entity recommends regulations that “safeguard monetary sovereignty and stability”
The International Monetary Fund (IMF) has laid out a nine-point action plan for how countries should treat crypto assets, in which they have called not to give cryptocurrencies like bitcoin legal tender status.
“Efforts to establish effective policies for crypto assets have become a key policy priority for authorities, amid the bankruptcy of various exchanges and other players within the crypto ecosystem, as well as the collapse of certain crypto assets. Doing nothing is unsustainable as crypto assets can continue to evolve despite the current recession,” the Fund notes.
The main recommendation of the international organization is “to safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and not granting crypto assets the status of official currency or legal tender.” They also ask that countries protect investors “against excessive volatility in capital flows” and maintain “the effectiveness of capital flow management measures.”
Among other suggestions, the Fund calls for analyzing and disclosing tax risks and adopting an unequivocal tax treatment of crypto assets; establishing the legal security of crypto assets and addressing legal risks; o Developing and applying prudential, conduct, and supervisory requirements to all cryptocurrency market agents, as well as establish a joint supervision framework between the different national bodies and authorities.
“By adopting this framework, policymakers can better mitigate the risks posed by crypto assets and, at the same time, take advantage of the potential benefits of technological innovation associated with them,” explains the body chaired by Kristalina Georgieva. In addition, Directors agreed that crypto assets “have implications for policies that are at the core of the IMF’s mandate.”
Similarly, the directors of the Fund highlighted that the “growing adoption of crypto assets in some countries, the extraterritorial nature of crypto assets and their providers, as well as the growing interrelationships with the financial system, motivate the need for a comprehensive, coherent and coordinated response.
“Overall, directors noted that while the purported potential benefits of crypto assets have not yet materialized, significant risks have emerged. These include macroeconomic risks, which encompass risks to the effectiveness of the monetary policy, the volatility of capital flows, and fiscal risks. They also pointed out serious concerns about financial stability, financial integrity, legal risks, consumer protection, and market integrity.
The IMF recently urged El Salvador to “reconsider” its plans to expand the government’s exposure to bitcoin through the issuance of ‘tokenized’ bonds due to legal risks, fiscal fragility, and the speculative nature of the crypto markets.
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