The International Monetary Fund (IMF) is advising countries not to grant crypto assets official currency or legal tender status as part of a 9-point framework to deal with cryptocurrencies.
The advice is available in a paper that was discussed by the organization’s executive board on February 8 2023 said to address questions raised by IMF member countries on benefits and risks of crypto assets and on how to structure appropriate policy responses.
“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 said.
As part of the policy response, the following 9 points are recommended:
1.) Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status
2.) Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures
3.) Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets
4.) Establish legal certainty of crypto assets and address legal risks
5.) Develop and enforce prudential, conduct, and oversight requirements to all crypto market actors
6.) Establish a joint monitoring framework across different domestic agencies and authorities
7.) Establish international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations
8.) Monitor the impact of crypto assets on the stability of the international monetary system
9.) Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance
Directors generally agreed that crypto assets should not be granted official currency or legal tender status in order to safeguard monetary sovereignty and stability, the IMF said.
Moreover, IM’s directors agreed that strict bans are not the first-best option, but that targeted restrictions could apply, depending on domestic policy objectives and where authorities face capacity constraints. Some IMF Directors on the board however said that outright bans should not be ruled out.
“Directors noted that regulation should be mindful not to stifle innovation, and the public sector could leverage some of the underlying technologies of crypto assets for their public policy objectives,” the IMF said.