The International Monetary Fund (IMF) says sovereign fiat currency should always be valued and protected over crypto assets.
In a new IMF blog post, the World Bank is encouraging countries to maintain the integrity of their financial systems to avoid being replaced by crypto assets.
“The defense against the substitution of sovereign currencies is to maintain robust, trusted and credible domestic institutions. Transparent, consistent and coherent monetary policy frameworks are crucial for an effective response to crypto asset challenges.”
For these and more reasons, countries should avoid considering crypto as legal tender, according to the IMF.
“To protect national sovereignty, it is important not to grant crypto-assets official currency or legal tender status. This would mean accepting them for tax payments, fines and debt settlements in many jurisdictions, and could pose fiscal risks to public finances and threaten financial stability or rapid inflation.”
The IMF functions as a bank for nations and helps with financial difficulties. For example, if a country is struggling to pay its debts, the IMF can provide financial assistance. In addition, the IMF assists countries in strengthening their economies.
This is not the first time the IMF has warned against crypto in relation to taxes.
Earlier this month, the IMF said global tax systems need to be modernized to accommodate crypto assets.
“Crypto transactions have similarities to cash transactions in that they can be hidden from tax authorities. Today, the share of purchases with crypto is still small. But widespread use, if tax systems were not prepared, could one day lead to widespread VAT and sales tax evasion, leading to significantly lower government revenues. This is perhaps the biggest threat to crypto.”
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