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- The IMF has rejected cryptocurrency as legal tender due to risks and volatility, recommending countries not grant crypto assets official currency or legal tender status.
- The IMF has provided a nine-point action plan for an appropriate policy response to crypto assets, including guarding against excessive capital flow volatility and establishing legal certainty of crypto assets.
- The Bangko Sentral ng Pilipinas plans to roll out its pilot implementation of Central Bank Digital Currency (CBDC) until 2024, while the IMF previously launched a global challenge for retail CBDC solutions.
Citing the recent crypto downturns and its volatility, the International Monetary Fund rejected cryptocurrency as a legal tender. According to them, significant risks have emerged over time with the increasing adoption of crypto assets, however they noted that the supposed potential benefits have yet to occur. They highlighted that crypto should not be granted official currency status to safeguard monetary sovereignty and stability.
IMF Paper on Crypto Assets
To drawout the conclusion, IMF stated that its Executive Board had discussed a paper, “Elements of Effective Policies for Crypto Assets,” that provided “guidance to IMF member countries on key elements of an appropriate policy response to crypto assets.”
The paper laid out a nine-point action plan for an appropriate policy response for how countries should deal with crypto assets.
According to the fund, their top recommendation is to “safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.”
Measures to Guard Against Crypto Risks
In addition, the IMF also highlighted that countries must also take measures to guard against excessive capital flow volatility, analyze and disclose fiscal risks and adopt ambiguous tax treatment of crypto assets, and establish legal certainty of crypto assets and address legal risk.
They also pointed out that monetary regulators must note the other elements such as; developing and enforcing prudential, conduct and oversight requirements to all actors; establishing a joint monitoring framework across different agencies and authorities; establishing international collaborative arrangements to enhance supervision; monitoring the impact on the stability of international monetary system, and strengthening global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.
Crypto Assets and Monetary Policy
Consequently, the fund also emphasized serious concerns about financial stability, financial integrity, legal risks, consumer protection and market integrity. As per its directors, crypto assets have implications for policies that lie at the core of the fund’s mandate.
“In particular, the widespread adoption of crypto assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures and exacerbate fiscal risks. Widespread adoption could also have significant implications for the international monetary system in the longer term,” it stated.
BSP and CBDC
Meanwhile, in the Philippines, the Bangko Sentral ng Pilipinas (BSP) announced last month that they would push through the roll out the pilot implementation of its Central Bank Digital Currency (CBDC)known as Project CBDCPh. As per an executive, the pilot test on selected financial institutions will continue until 2024. (Read more: Pilot Test of Wholesale Central Bank Digital Currency in PH ‘Til 2024, BSP Reiterates )
A CBDC, unlike cryptocurrencies, is a digital currency centralized, issued, and regulated by a central bank that can serve as a medium of exchange or store of value. It is basically the digital form of traditional money of a national bank but is different from e-money. In March 2022, the BSP stated that it will pursue the pilot project of a wholesale CBDC as part of its aim to promote the stability of the country’s payment system.
In 2021, the IMF priorly joined the Monetary Authority of Singapore (MAS), World Bank, Asian Development Bank, United Nations Capital Development Fund, United Nation High Commission For Refugees, United Nations Development Programme, and the Organisation for Economic Co-operation and Development (OECD) to launch global challenge for retail Central Bank Digital Currency (CBDC) solutions which aims to enhance payment efficiencies and promote financial inclusion. (Read more: SG Central Bank, IMF, World Bank Launch Retail Digital Currency Challenge)
This article is published on BitPinas: International Monetary Fund – IMF – Rejects Crypto as Legal Tender
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.