IMF: Don’t Ban Cryptocurrencies, Understand Their Appeal

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  • The International Monetary Fund has said that banning crypto is not viable in the long run
  • The IMF claims that countries are just dying to implement CBDCs
  • It urges governments to understand the appeal of cryptocurrencies and apply it to CBDCs

The International Monetary Fund (IMF) has urged governments to understand the appeal of cryptocurrencies and apply this appeal to future payment methods rather than banning them outright. In a report published yesterday, the IMF, which is a noted crypto critic, says that banning cryptocurrencies “may not be effective in the long run” and instead pushes for properly regulated Central Bank Digital Currencies (CBDCs) which it says should reflect the needs of its citizens.

IMF Has Issued Crypto Warnings Before

The IMF has generally been negative on the prospects and impact of cryptocurrencies, warning that they will bring instability to any country that goes down that road. This was most notable when it warned El Salvador that its adoption of Bitcoin would reduce its global standing. It has, however, stopped short of demanding any kind of ban on cryptocurrencies, favouring regulation over prohibition, as its Managing Director Kristalina Georgieva stated earlier this year.

The IMF’s new report, which focuses on crypto adoption in Latin America and the Caribbean, claims, unsurprisingly, that interest in CBDCs in the two regions is picking up whereas crypto adoption is petering out. The report cites a 2022 study which found that “Bitcoin is still not a widely accepted medium of exchange” in the country, while half of the respondents of its own study were considering both retail and wholesale (financial institutions) CBDC options, seeing them as a “means to enhance their payment systems and broaden their access”.

Governments Should Understand Crypto Appeal

Conversely, the report states that “Crypto assets present risks that vary by country circumstances,” but states that their appeal clearly means that something is wrong with the current financial system if people want to use them. Rather than banning them, the IMF says, countries should learn what it is that their citizens like about them and ensure that those concerns are addressed with a CBDC:

While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run. The region should instead focus on addressing the drivers of crypto demand, including citizens’ unmet digital payment needs, and on improving transparency, by recording crypto asset transactions in national statistics.

Of course, one of the things that crypto users like is the fact that their every transfer and purchase isn’t tracked by the government, so let’s see how successful that is shall we?