IMF Owns Countries That Use Cryptocurrencies As Official Distribution Devices

The IMF provides a warning to countries that adopt cryptocurrencies. (Photo; Doc. Beincrypto)

JAKARTA - The International Monetary Fund (IMF) issued a warning that granting cryptocurrency status as a legal tender or official currency could have a negative effect on the sovereignty and monetary stability of a country.

According to the IMF, this could be a financial stability issue as it increases the adoption and exposure of traditional financial institutions to crypto assets that are volatile and will increase their risk profile. The IMF emphasizes that granting cryptocurrency status as an official currency or legal tender should be avoided and government revenues should be protected against volatility issues.

The IMF advises countries to minimize the use of cryptocurrencies as official means of payment and avoid guaranteeing crypto conversion to fiat. The IMF also says that the lack of credible domestic institutions and policies is the first line of defense in terms of the monetary stability of a country and weaknesses here often cause people to exchange their fiat for foreign currencies.

To reduce fiat substitution into crypto assets, the IMF recommends building a stronger institution and creating solid policies that increase trust in traditional systems.

The IMF emphasizes the need to create a transparent, coherent, and consistent Monetary Policy Framework (MPF) to ensure the public understands its policies and impacts. This solid MPF is expected to help maintain market expectations, curb currency substitution, and ensure the effectiveness of monetary policy.

The IMF highlights eight other points that their countries and central banks must consider for policymaking and effective cryptocurrency regulation. The IMF appeals to countries to protect against excessive capital flows and manage capital flows appropriately through effective measures. The IMF also said that risks derived from crypto assets should be analyzed regularly and taxation on such assets should be "irmbiguous".

In addition, countries need to establish "law certainty" around crypto assets and address the risks needed proactively. The IMF encourages countries to create frameworks across institutions, as well as ensure timely and effective regulations in this sector. The last three elements focus on increasing global cooperation among regulators and rulers. The IMF says that countries should also monitor how crypto assets impact other economies.

The IMF is urging global collaboration in developing digital infrastructure and alternative solutions to increase cross-border payments as this is one of the core areas where cryptocurrency utility outperforms fiat money as a financial system that has been in use in recent years.