International Monetary Fund (IMF) has She said that cryptocurrencies are nothing more than an “inadvisable shortcut” to financial inclusion.
“As a national currency, crypto assets, including Bitcoin – pose substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment,” the IMF wrote in a blog post.
A breakdown of IMF concerns
When it comes to cryptocurrencies as a national currency, the IMF has four key concerns.
first and most important is macroeconomic stability. Government revenues would suddenly be exposed to exchange rate risks, for example if taxes were priced in cryptocurrencies while expenses remained priced in local currency or vice versa, the IMF said.
Monetary policy would also “lose its strength” and domestic prices could become “highly unstable.” “Even if all prices were quoted, for example, in Bitcoin, the prices of imported goods and services would continue to fluctuate massively, following the vagaries of market valuations,” the organization said.
” official monetary unit must have a sufficiently stable value to facilitate its use for medium and long-term monetary bonds,” added the IMF.
Another key concern for the IMF is financial integrity or, more bluntly, the pervasive risk of financial crime. organization cited the use of cryptocurrencies to finance terrorism, evade taxes, and launder illicit funds.
Guidance on these risks is published by the Financial Action Task Force (FATF), a global supervisory body on financial crime. However, as the IMF itself points out, the application and enforcement of these standards are far from consistent throughout the world.
Furthermore, the IMF cited the damaging impact of the cryptocurrency industry on the environment as a key obstacle.
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“Mined crypto assets like Bitcoin require huge amounts of electricity to power the computer networks that verify transactions. ecological implications of adopting these cryptocurrencies as a national currency could be disastrous, “said the IMF.
If it weren’t for these top concerns, the IMF is urging countries looking to adopt cryptocurrencies to consider internet accessibility and cyberattacks, such as ransomware.
“Internet access and the technology needed to transfer cryptocurrencies remain in short supply in many countries, raising issues of equity and financial inclusion,” the IMF said.
IMF draws attention to El Salvador
se are all problems facing El Salvador, which is the only country in the world that has made great strides in adopting a cryptocurrency, Bitcoin, as legal tender.
Furthermore, the IMF had previously told El Salvador in clear terms that it was not interested in helping the Latin American country carry out its Bitcoin project.
IMF added that in countries with stable inflation and exchange rates, as well as credible institutions, the demand for cryptocurrencies is unlikely to double as legal tender.
But even in El Salvador, where inflation has been a topic of political discussion for years, the country’s Bitcoin project has drawn much criticism.
For a study by the Francisco Gavidia University in El Salvador, more than 75% of Salvadorans think that the adoption of Bitcoin as legal tender by President Bukele “is not very wise.”
In addition, 43%, almost half of the survey respondents, believe that the adoption of Bitcoin will be detrimental to the country. Only one in four people think it will be useful.
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