IMF Too Warns States Not to Adopt Crypto through Legal Tenders

Finally, the International Monetary Fund (IMF) too has broken its silence and commented upon the issuing of legal tenders by states to the virtual assets, explicitly to the Bitcoin. IMF was of the view that countries should keep themselves away from offering any such legal tenders to any kind of virtual currencies because there are high risks involved in embracing virtual currencies as national currencies.

El Salvador is the first and single country in the whole world that has officially offered a legal tender to Bitcoin. As of today, Bitcoin is treated as the national currency of El Salvador, thanks to President Nayib Bukele of El Salvador. However, since embracing Bitcoin as El Salvador’s national currency, the step taken by Bukele’s regime is strongly criticized by the Salvadoran majority. People are saying that they did not want Bitcoin or any of the virtual assets to be their national currency. But the Government’s decision has been imposed upon them against their will.

In any case, most of the countries in the North and South American region appreciated Bukele for his Bitcoin initiative. Some of them even also shared their intention and willingness to implement the same decision with their respective countries.

Now the concerns regarding Bitcoin’s adoption as a national currency have grown within the quarters of the International Monetary Fund (IMF). A blog was posted by IMF recently in which IMF discussed cryptocurrencies through the perspective of national currencies. The name of the post also suggested that the adoption of Bitcoin through legal tender is “a step too far”. Rhoda Weeks-Brown, Financial Counselor/Director at IMF said that nothing could be worse than adopting virtual currencies as national currencies.

However, without mentioning the name of El Salvador, Weeks-Brown suggested that there are substantial risks associated with virtual assets or currencies. Bitcoin is also no different and therefore has its own potential risks that are punitive in nature. According to Weeks-Brown, the risks include consumer protection and instability within the financial integrity and stability.

However, IMF duly acknowledged the utilization of the underlying technologies arising out of crypto like the blockchain. IMF insisted that the states should embrace such technologies and make good use of them. But any attempts in embracing virtual assets as national currencies should be avoided at all costs. Weeks-Brown termed Bitcoin’s adoption as national currency as an “ill-advised shortcut”.

IMF’s representatives were also of the further opinion that crypto wouldn’t be successful in bad economies as it would be in stable economies. However for countries with bad economic conditions, still they could rely either on the USD or the Euro, advised IMF’s representatives. They also pointed out that there is a chance that crypto will benefit those people in bad economies who do not rely on banks. Though they could use crypto for payments yet they cannot regard it as a store of value.