The International Monetary Fund (IMF) stated that banning crypto “may not be effective in the long run”.
The comment was made in a post promoting Central Bank Digital Currencies (CBDCs) in the Latin America and Caribbean (LAC) regions. It stated that LAC countries are “at the forefront of digital money adoption,” and then delineate the term digital money into CBDCs and crypto-assets.
On the latter, the post noted that Brazil, Argentina, Colombia, and Ecuador rank highly in the Chainalysis top 20 countries for global crypto asset adoption — stating that crypto investors in these countries “seek the benefits that digital assets claiming to offer”, including:
“protection against uncertain domestic macroeconomic conditions, circumvention of capital controls, improved financial inclusion for the unbanked, cheaper and faster payments and stronger competition.”
At the same time, cryptocurrency adoption poses challenges and risks, especially for “vulnerable LAC countries,” due to a history of factors including macroeconomic instability, low institutional credibility and corruption, among others, the IMF said.
In contrast, according to an IMF survey of LAC government officials, most respondents saw CBDCs as “a means to improve their payment systems and broaden their access” – with financial inclusion and reducing currency substitution with stablecoins or crypto as benefits.
Crypto risks
To mitigate the risks while continuing to exploit the potential benefits of crypto, the IMF has provided appropriate guidance for policy responses. It included advice on:
- secure monetary policy
- controlling the flow of capital
- including an unambitious crypto tax treatment
- creating legal certainty around digital assets
- exercise careful supervision
- establishing monitoring frameworks for agencies and authorities
- monitoring the impact on monetary systems
- strengthening global cooperation in this area
Further, the IMF stated that while some countries have banned crypto, this policy strategy may not work in the long run. It added that countries should instead address factors related to cryptocurrency demand.
“focus instead on addressing the drivers of crypto demand, including citizens’ unmet digital payment needs, and on improving transparency, by capturing crypto asset transactions in national statistics.”
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