IMF warns against adopting crypto assets as national currency

[ad_1]

The International Monetary Fund has warned against plans by some countries to adopt crypto assets such as bitcoin and ethereum as legal tender.

This was contained in an article titled Crypto Assets as National Currency? A Step Too Far by Tobias Adrian, Financial Advisor and Head of the IMF’s Monetary and Capital Markets Department, and Rhoda Weeks-Brown, General Counsel and Head of the IMF’s Legal Department.

The fund said it does not see crypto assets or currencies spreading as national currencies, highlighting many risks and detrimental effects if this happens.

The message read in part, Bitcoin and its peers have mostly stayed on the sidelines of finance and payments, but some countries are actively considering granting legal tender status to crypto assets, and even making a second one ( or potentially the only) national currency.

If a crypto asset was legal tender, it would have to be accepted by creditors as payment for monetary obligations, including taxes, similar to notes and coins (money) issued by the central bank.

Countries can even go further by passing laws to encourage the use of crypto assets as a national currency, that is, as an official monetary unit (in which monetary obligations can be expressed) and as a compulsory means of payment. for daily shopping.

Crypto assets are unlikely to spread to countries with stable inflation and exchange rates and credible institutions.

Households and businesses would have very little incentive to price or save in a parallel crypto asset such as Bitcoin, even if it had legal tender or currency status. Their value is simply too volatile and unrelated to the real economy.

Even in relatively less stable economies, using a globally recognized reserve currency such as the dollar or the euro would likely be more appealing than adopting a crypto asset.

Copyright PUNCH.

All rights reserved. This material and any other digital content on this website may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without the express prior written permission of PUNCH.

Contact: [email protected]

[ad_2]