In a recent development, the IMF has come forward with a nine-point action plan that specifies how countries should treat cryptocurrencies. The action plan advises that cryptocurrencies must not be granted the status of a legal tender. The Executive Board of the global lender discussed the paper Elements of Effective Policies for Crypto Assets in detail. The analysis provided IMF with guidance to create appropriate policies for crypto assets.
Based on the collapse of a number of crypto firms during the fierce crypto winter, the IMF claims that such efforts have become mandatory. As of now, the top recommendation is to maintain the sovereignty of money and stability by making monetary policy frameworks stronger. Similarly, this includes not granting the status of legal tender to a crypto token.
It is important to keep in mind that the IMF took a dig at El Salvador previously in 2021. The lender hit out at the country soon after its announcement of crowning Bitcoin as the legal tender. Similarly, the move became something that was copied by the Central African Republic. Other advice from the IMF included guarding against too much capital flows. Furthermore, developing and enforcing new oversight requirements for the players in the crypto market was also suggested in the framework.
IMF Takes a Dig at the Crypto Space
The IMF continuously highlighted and asserted the importance of countries establishing international arrangements to boost supervision and stability. Apart from this, the lending body suggested the implementation of different ways to monitor the impact on crypto on the global economy. As per the press release,
“Efforts to put in place effective policies for crypto assets have become a key policy priority for authorities, amid the failure of various exchanges and other actors within the crypto ecosystem, as well as the collapse of certain crypto assets. Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn.”
The IMF observed that the benefits from crypto assets are yet to materialize, but the risks have grown considerably. They include macroeconomic risks that revolve around the effectiveness of monetary policy, capital flow volatility, and much more. Similarly, the directors agreed that it was necessary to develop and apply comprehensive regulations.
In addition, IMF says that it must be committed in supporting the regulatory work by working under the guidance of standard-setting authorities. It was decided that straight-up bans may not be the best course of action, but targeted restrictions may be a better alternative.
Furthermore, the directors insisted that the regulation itself must be mindful enough to not serve as barriers to innovation. Similarly, the public sector could benefit itself via the use of crypto asset technologies for achieving public policy objectives.
