The IMF does not rule out a complete ban on cryptocurrencies

The International Monetary Fund has developed an action plan for handling crypto assets. The first point of the document was a call not to grant cryptocurrencies, such as BTC, the status of legal tender.

IMF: Cryptocurrencies should not be made legal tender.

EL SALVADOR: ???#Bitcoin?‍♂️?

— Bitcoin Archive (@BTC_Archive) February 23, 2023

The IMF board members believe that the potential benefits of crypto assets have not yet been realized, and the threats from the use of cryptocurrencies have already had consequences. The main concerns of the IMF are that the widespread use of crypto assets could undermine the effectiveness of monetary policy and increase fiscal risks.

However, the agency believes that a complete ban on cryptocurrencies is not the best way out, but this is a debatable issue: several IMF directors have said that this option should not be ruled out.

The International Monetary Fund has published the main recommendations on how to handle crypto assets:

• Protect monetary sovereignty, do not grant digital assets the status of official currency or legal tender;
• Beware of excessive volatility of capital flows and maintain effective capital management measures;
• Analyze fiscal risks and adopt an unambiguous tax regime for cryptocurrencies;
• Establish legal certainty for digital assets and eliminate legal risks;
• Develop and enforce regulatory requirements from all industry participants;
• Create a common monitoring system between different national agencies and authorities;
• Develop international cooperation mechanisms to enhance oversight and enforcement of crypto regulation;
• Monitor the impact of the new asset class on the stability of the international monetary system;
• Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and financing.

The IMF emphasized that the regulation of cryptocurrencies «should be reasonable» so as not to stifle innovation, and the public sector can use some of the underlying technologies of crypto assets for its own public policy purposes.

However, not only the world’s largest financial institution considers cryptocurrencies a threat. The UN suggests that digital assets can facilitate illegal financial activities and disrupt the financial stability of countries.

The organization also gave advice on regulating the use of cryptocurrencies:

• introduce high taxes on cryptocurrency transactions;
• to prohibit financial institutions from holding digital assets and offering services related to the use of cryptocurrencies to clients.