The International Monetary Fund (IMF) has released an action plan containing nine recommendations for how countries should regulate cryptocurrencies. The IMF’s top recommendation is that cryptocurrencies such as bitcoin should not be granted legal tender status, nor official currency status. The IMF made it clear that it wants countries to safeguard monetary sovereignty and stability by strengthening monetary policy frameworks. It also called on countries to develop and enforce oversight requirements for all crypto market actors and establish international arrangements to enhance supervision and enforce regulations.
The IMF’s stance follows the collapse of a number of crypto exchanges and assets over the past few years. The fund said that doing nothing about the issue was no longer an option. Authorities have made regulating cryptocurrencies a priority, especially after the Central American country, El Salvador, became the first country to adopt bitcoin as legal tender in late 2021.
Recommendations to Regulate Crypto Assets
The IMF’s paper, “Elements of Effective Policies for Crypto Assets,” provides guidance to IMF member countries on key elements of an appropriate policy response to crypto assets. According to the fund, countries should guard against excessive capital flows and adopt unambiguous tax rules and laws around crypto assets. They should also set up ways to monitor crypto’s impact on the stability of the global monetary system.
The IMF also recommended that countries should not ban cryptocurrencies outright, as strict bans of assets are not the first-best option. However, a few directors thought they should not be ruled out. The fund believes that the widespread adoption of crypto assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks.
IMF’s Executive Board’s Assessment
The IMF’s Executive Board welcomed the proposals contained in the paper and agreed that the widespread adoption of crypto assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks. The directors generally agreed that crypto assets should not be granted official currency or legal tender status.
The IMF’s action plan provides guidance for how countries should regulate cryptocurrencies. The fund believes that cryptocurrencies should not be granted legal tender or official currency status, and that countries should strengthen their monetary policy frameworks to safeguard monetary sovereignty and stability. The IMF also called on countries to adopt unambiguous tax rules and laws around crypto assets, develop and enforce oversight requirements, and set up ways to monitor crypto’s impact on the stability of the global monetary system.
