The International Monetary Fund (IMF) has reinforced its appeal for cryptocurrency regulation in several countries, suggesting that an outright ban might not be the most beneficial strategy.
IMF’s Take on Latin America and the Caribbean
In a report published on June 22 focusing on Latin America and the Caribbean, the IMF outlined the different methods employed by local governments to handle the adoption of cryptocurrencies and central bank digital currencies (CBDCs). Bitcoin became legal tender in El Salvador since September 2021, while the Bahamas pioneered with the launch of its own CBDC, the Sand Dollar, in October 2020.
According to the IMF, countries like Brazil, Argentina, Colombia, and Ecuador, which are in the process of developing crypto regulations, are among the global frontrunners in adopting digital assets. These countries leverage crypto technologies to aid unbanked populations, facilitate faster and more affordable payments, among other uses. The IMF also noted that the majority of central banks in these regions are contemplating adopting digital currencies.
Balancing Crypto Regulation and Benefits
The IMF report highlighted, “If well designed, CBDCs can strengthen the usability, resilience, and efficiency of payment systems and increase financial inclusion in [Latin America and the Caribbean].” While some countries have entirely banned crypto assets due to their inherent risks, the IMF proposes that this approach might not prove effective in the long term. Instead, the focus should be on addressing the factors driving crypto demand, such as unmet digital payment needs of citizens, and enhancing transparency by recording crypto transactions in national statistics.
Despite its frequent public criticism of countries embracing cryptocurrencies as legal tender, the IMF’s recent report suggests a more nuanced approach. On June 19, Tobias Adrian, its director of the monetary and capital markets department, received significant backlash from the crypto community when he proposed a payment system that recorded CBDC transactions on a single ledger.
