IMF Says Making Bitcoin a National Currency is ‘Inadvisable Shortcut’ »alt =» IMF says that making Bitcoin a national currency is a «scorciatoia sconsigliabile» 101 ″ class = »content-img» /> Source: Adobe / Maksym Yemelyanov

As El Salvador is preparing to convert bitcoin (BTC) into legal tender in September, the International Monetary Fund (IMF) issued another warning, noting that this move “is an inadvisable shortcut.”

While governments must ‘step up’ to offer the benefits of cryptocurrency technology, as well as to take advantage of new forms of digital money, doing so by adopting a real cryptocurrency could be dangerous as they must preserve stability, efficiency, equality and sustainability. environmental, according to two IMF directors. However, proponents of cryptocurrencies argue that that is exactly what BTC brings.

In a blog post, the IMF’s Financial Advisor and Head of the Monetary and Capital Markets Department, Tobias Adrian, and the IMF’s General Counsel and Head of the Legal Department, Rhoda Weeks-Brown, argue that the benefits of the underlying technologies of cryptocurrencies should not be overlooked as these include the potential for cheaper and faster payments, more inclusive financial services, better resilience, etc.

However, “trying to convert cryptocurrencies into a national currency is an inadvisable shortcut,” they said. “As a national currency, cryptocurrencies, including Bitcoin, pose substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment.”

In most cases, the risks and costs outweigh the potential benefits of transforming a cryptocurrency into a national currency, the authors said, and went on to outline their arguments.

” most direct cost of mainstream adoption of a cryptoasset like Bitcoin is macroeconomic stability,” they said. For households and businesses, having goods and services priced in two currencies would mean investing time and resources in choosing which money to keep.

legal tender for a cryptocurrency means that creditors must accept said cryptocurrency as payment of monetary obligations, including taxes. For governments, revenues would be exposed to currency risk if taxes were traded on a crypto asset while expenses were primarily held in fiat, or vice versa.

Monetary policy would “lose its steam” since central banks cannot set interest rates in a foreign currency. For cryptocurrencies, it is not possible to ‘import’ the credibility of another monetary policy.

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As a result, domestic prices could become unstable, and even if all prices were quoted in BTC, the prices of imported goods and services would “fluctuate wildly.”

re would be a blow to financial integrity, the authors argue. potential use of cryptocurrencies for money laundering, tax evasion, or terrorist financing could threaten the financial system, fiscal balance, and relationships with foreign countries and a country’s correspondent banks.

Even if the Financial Action Task Force (FATF) has established a standard to regulate virtual assets to minimize these risks, the IMF says its application is still not consistent across countries.

Banks and other financial institutions could be exposed to the volatility of cryptocurrencies, although ‘it is not clear if prudential regulation against foreign currency exposures or risk assets in banks could be respected if it were granted to bitcoin, for example , the status of legal tender ”.

Cryptocurrencies are unlikely to become popular in countries with stable inflation and exchange rates and credible institutions, as both households and businesses would have little incentive to list / save in cryptocurrencies as they are volatile and ‘unrelated to the real economy. ‘

Using a globally recognized reserve currency, such as the USD or EUR, can be more attractive even in relatively less stable economies, the authors said.

Legal issues arise from the fact that legal tender status requires that a means of payment be widely accessible, but internet access and the technology necessary to transfer cryptocurrencies are not, raising concerns about equity and security. financial inclusion.

As for the argument that adopting cryptocurrencies would benefit the unbanked, the authors say that they could become a popular vehicle for making payments, but not for storing value, as it would “be immediately exchanged for real currency.”

But there is a “but” that can be beneficial for cryptocurrencies and their widespread use, according to the publication: “real currency” may not always be available; may not be easily transferable; and other forms of money may be prohibited / restricted in some countries.

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However, according to Adrian and Weeks-Brown, the widespread use of cryptocurrencies would undermine consumer protection, as consumers could lose wealth due to volatility, fraud, cyberattacks, or underlying technology failures that otherwise it would be robust.

Finally, given that BTC is undermined, “the ecological implications of adopting these cryptoassets as a national currency could be disastrous,” they concluded, reiterating previous concerns that have been denied multiple times.

cryptovert strikes again

Cryptoverse was quick to comment on the post, with some saying it “sums up every piece of FUD [fear, uncertainty, doubt] and disinformation available” and its content as “excess normative and biased statements.”

In essence, from the comments, it appears that the post was incorrect and correct: incorrect in its arguments and assumptions, which have already been discussed and denied numerous times, but also because cryptocurrencies do not need the traditional system, only the opposite. . y are created to avoid it. And this is where the post could be right: cryptocurrency is effectively a risk for traditional institutions, simply because its goal, as well as the goal of all surrounding infrastructures, is to replace them and / or offer an alternative.

Economist Daniel Sánchez argued that “the error of being able to control” monetary policy “is affecting the trade deficits of many countries.”

For him, the objective of using cryptocurrencies is not to get rich but to carry out transactions freely, with the information visible on the blockchain and available to everyone, not to have people’s money “stolen” to finance their wars, invasions and political mistakes. . Inflationary growth «.

In addition, Sánchez pointed out that there are already solutions made or in process of the arguments raised in the post. For example, there are free solutions and free tools available for the services offered by retail banks.

When it comes to devaluation, inflation, and people losing wealth to scams, this happens every day with fiat, many commentators have noted. It is money printing and costly monetary policies that pose a threat to financial and economic stability, they said.

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– jack (@jack)

For a commentator’s article the IMF, the country used BTC “to solve the problem you are supposed to handle the IMF ‘.___ To learn more: – How the Fiat International Fund hurts countries with liquidity problems (FYI , El Salvador) – Demonstrators protest against Bitcoin in front of the parliament of El Salvador

– Unconfirmed Stablecoin report creates confusion between Bukele’s Bitcoin law – Government of El Salvador: we are distributing Bitcoin, but we are not converting it to Fiat

– El Salvador brings a new global puzzle: what is Bitcoin and how to tax it? – El Salvador will be a serious test for Layer-2 networks of Bitcoin

– Technically capable Bitcoin has other mass adoption challenges to solve – Mass adoption of Bitcoin would benefit and harm today’s economy

– Imagine Bitcoin as a reserve asset. So what? – An economic crisis fueled by debt and Bitcoin: what to expect?

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