A new statement from the executive board of the International Monetary Fund (IMF) released on Thursday, warns nations that they should not grant official currency or legal tender status to cryptocurrency assets.
The IMF offered nations guidance through summarizing the discussions it had held earlier this month on the fund’s new nine-point action plan for how nations should deal with crypto assets, called “Elements of Effective Policies for Crypto Assets.” The paper noted it offered, “guidance to IMF member countries on key elements of an appropriate policy response to crypto assets.”
The major recommendation of the fund, according to its statement, is to “safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and not granting crypto assets official currency or legal tender status.”
The statement went on to warn that adopting crypto assets as official legal tender, “could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks.”
It concluded that countries should focus on developing tax rules and legal frameworks regarding crypto assets, while noting that a failure to do so was “untenable,” given the recent failures of several big-name crypto exchanges.
The statement said, “Directors agreed that strict bans are not the first-best option, but that targeted restrictions could apply [to limit crypto risks]. A few Directors, however, thought that outright bans should not be ruled out… The growing adoption of crypto assets in some countries, the extra-territorial nature of crypto assets and its providers, as well as the increasing interlinkages with the financial system, motivate the need for a comprehensive, consistent, and coordinated response.”
As the crypto sector imploded last year, almost $1.4 trillion in value was wiped out amid collapses in value and bankruptcies in the sector. The crisis was led by the fall of crypto exchange FTX, which was the second largest crypto exchange in the world at the time it went bankrupt.
Meanwhile, Bitcoin, the largest cryptocurrency by market capitalization, has been slowly creeping up in value over the past weeks, regaining some of last year’s losses. However it still remains well below its peak of just above $69,000. The rest of the crypto-market has traditionally tracked alongside bitcoin.
