On Thursday, the International Monetary Fund published its new nine-point action plan, where it called for member states to strengthen their tax treatment and work on a coordinated response to crypto assets.
Earlier this month, the IMF Executive Board — 24 directors appointed by the agency’s member states — discussed a staff paper that assessed the risks posed by the growing crypto adoption, including implications for monetary and fiscal policies.
“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 statement said, referencing a February 8 board meeting.
“Directors generally observed that while the supposed potential benefits from crypto assets have yet to materialize, significant risks have emerged,” the Fund said, discouraging member states from providing cryptocurrencies a legal tender status. “These include macroeconomic risks, which encompass risks to the effectiveness of monetary policy, capital flow volatility, and fiscal risks. They also noted serious concerns about financial stability, financial integrity, legal risks, consumer protection, and market integrity.”
The nine policy actions laid out by the IMF are:
- Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.
- Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures.
- Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets.
- Establish legal certainty of crypto assets and address legal risks.
- Develop and enforce prudential, conduct, and oversight requirements to all crypto market actors.
- Establish a joint monitoring framework across different domestic agencies and authorities.
- Establish international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations.
- Monitor the impact of crypto assets on the stability of the international monetary system.
- Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.
The Directors agreed that banning crypto is “not the first-best option,” as it can stifle innovation, plus some of the underlying technologies of crypto assets can actually benefit the public sector. Still, a few board members believe that an outright ban on crypto assets isn’t completely off the table.
“The growing adoption of crypto assets in some countries, the extra-territorial nature of crypto assets and its providers, as well as the increasing interlinkages with the financial system, motivate the need for a comprehensive, consistent, and coordinated response,” the statement added.
Previously, the IMF urged El Salvador to remove Bitcoin as legal tender, stressing that it would make getting a loan from the organization more difficult. A tiny Central American nation became the first country to allow consumers to pay with crypto, alongside the US dollar.
In February this year, the IMF acknowledged that El Salvador’s bitcoin risks “have not materialized due to the limited bitcoin use so far,” but noted that the use of crypto still requires transparency and attention.