El Salvador and the Central African Republic are already using Bitcoin as legal tender. The International Monetary Fund takes a critical view of such developments and recommends in a nine-point action plan not to follow the example under any circumstances.
The International Monetary Fund (IMF) has advocated denying cryptocurrencies legal tender status. This is point number one in a nine-point list of recommendations from the fund on how countries should deal with cybercurrencies like bitcoin. The IMF announced that its Executive Board had discussed a corresponding report. This presents key elements for a political reaction to cryptocurrencies. After the collapse of crypto exchanges and assets in recent years, this is a priority for authorities.
The first recommendation in the report, according to the IMF, is that crypto assets should not be given “official currency or legal tender status.” It is important to protect monetary policy sovereignty and stability by strengthening the relevant frameworks. The IMF had criticized El Salvador in late 2021 when the Central American country allowed Bitcoin as legal tender. The Central African Republic later followed this step.
Other recommendations on the list include protecting against excessive capital flows, enacting clear cryptocurrency tax rules and laws, and developing and implementing regulatory regulations for crypto market players. Countries should also enter into international agreements to strengthen oversight and enforce regulations. In addition, ways should be found to monitor the impact of cryptocurrencies on the stability of the financial system.
The IMF directors welcomed the proposals, the fund said. They agreed that widespread adoption of cryptocurrencies could undermine the effectiveness of monetary policy. Measures to control capital flows could then be circumvented and fiscal risks exacerbated. There was also general agreement that cryptocurrencies should not be given official currency or legal tender status. While a strict asset ban is “not the first option,” some directors have expressed the view that it should not be ruled out.
