IMF Advises Against Cryptocurrency Legal Tender Status In New Plan

IMF releases crypto action plan advising against legal tender status. The IMF published the nine-point project on Thursday following the presentation of the staff paper, which highlighted the risks of crypto to monetary policy, financial stability, tax collection, and consumer protection. Furthermore, the plan offers guidance for effective crypto regulation.

IMF warns against granting official cryptocurrency or legal tender status. However, the board states this could harm monetary sovereignty and stability. Instead, countries should strengthen and clarify their crypto tax policy and align with international standards to safeguard against potential risks.

IMF’s nine-point action plan suggests targeted restrictions to limit crypto risks. Banning crypto is not the first-best option to avoid stifling innovation. However, some board members feel that “outright bans should not be ruled out.” 

Crypto assets require a comprehensive and coordinated response. Growing adoption in some countries, the extra-territorial nature of support, and Interlinkages with the financial system require a consistent approach. Furthermore, the IMF emphasizes the importance of a robust and transparent crypto tax policy.

According to the IMF, governments could use capital controls to evade cryptocurrencies. It has also discouraged countries from making Bitcoin (BTC) their legal currency, as in the case of El Salvador.

India, G20 current holder, is working with IMF on crypto regulation. Ajay Seth, Department of Economic Affairs Secretary, confirms collaboration. Efforts are underway to develop the regulatory framework for cryptocurrencies.

IMF’s action plan guides regulation of the growing crypto industry. Encourages limiting risks while avoiding stifling innovation. The graph shows a practical and balanced approach.

The IMF Urges Countries To Take Coordinated Action

IMF’s action plan calls for a coordinated response to growing crypto adoption. Extra-territorial nature of assets and providers requires cooperation. Governments urged to strengthen and clarify crypto tax policy. The plan emphasizes the need for alignment with international standards.

Furthermore, this approach would safeguard against the industry’s potential risks, such as using cryptocurrencies to evade capital controls. The plan discourages legal tender status, citing potential harm to stability, and the program suggests targeted restrictions to limit risks.

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India works with IMF and others to develop a regulatory framework. Further, the plan guides effective regulation while avoiding stifling innovation. Coordinated response urged to limit risks associated with crypto assets, and countries can take steps to limit risks with IMF guidance.

The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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