The International Monetary Fund (IMF) has changed tack on its policies regarding banning cryptocurrencies. After long recommending nations ban cryptocurrencies, the agency is now saying that might be the wrong action to take.
IMF economists released a new report on Thursday, examining the usage of cryptocurrency across Latin America and the Caribbean. Throughout the region, acceptance of the digital currencies varied widely with some nations like El Salvador being open to its adoption, and others more cautious in the face of the perceived risks they see. In the report, the IMF economists advocated for a position of adopting cryptocurrencies, within the confines of a strong regulatory framework.
The economists concluded, “While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run.”
It is a stark shift from another report issued by the IMF just months earlier, which said nations should consider banning cryptocurrencies.
In the report issued Thursday, the IMF’s economists noted the advantages cryptocurrencies offer to early adopters. They noted it offers protections against macroeconomic uncertainties, it promotes financial inclusion, and it allows for faster payments, among other advantages.
The report also looked at recent attempts in Latin America to develop central bank digital currencies (CBDCs).
The report looked at a survey of officials throughout the region which found that half of the respondents said both retail and institutional CBDC options were being considered by them for implementation. Advantages of CBDCs they cited were the ability to promote resilience in communities vulnerable to natural disasters, as well as the ability to boost financial inclusion in more remote communities.
The IMF wrote that most Latin American countries are still just researching CBDCs, however a few have advanced to the experimental stage. It noted that Brazil is the largest to be looking at a CBDC. It has been examining the issued since 2020, and has plans to launch one in 2024.
The report also examined the difficulties in integrating cryptocurrencies into a nation’s economy.
In May, Argentina clamped down on cryptocurrencies by banning payment apps from offering it to customers in the nation. The report noted that even in El Salvador, where the government had granted Bitcoin legal tender status, allowing it to be used to settle transactions, the digital currency was having difficulty becoming more widely used.
