IMF Recommends Not Using Crypto As Legal Tender

The International Monetary Fund (IMF) has proposed a nine-point action plan on how countries should treat crypto assets. Among all the points, the IMF has recommended that countries not give any crypto asset a legal tender status.

On Thursday (February 23), IMF said its executive board discussed a paper, “Elements of Effective Policies for Crypto Assets”, which was said to guide IMF member countries on key elements of an appropriate policy response to crypto assets.

“The paper’s objectives are in line with the IMF’s mandate to support economic and financial stability across its membership,” said the global lender. It further added that such efforts have become a priority for authorities after the collapse of several crypto exchanges and assets over the past few years.

“Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn,” said IMF.

The recommendations have been followed by the IMF managing director Kristalina Georgieva stating in Bengaluru that banning private crypto should be a part of the discussions. Georgeiva was speaking at the G20 meeting in Bengaluru on Friday (February 24).

IMF’s Nine-Point Crypto Recommendations

On the nine-point framework put forward by the IMF, the first recommendation was to “Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.”

Several countries have taken up Bitcoin and other cryptocurrencies and given them legal tender status. IMF had also hit out at El Salvador after it adopted Bitcoin as a legal tender. Since then, the Central African Republic has also done the same.

Other recommendations include guarding against excessive capital flow volatility, maintaining the effectiveness of capital flow management measures and adopting unambiguous tax treatment of crypto assets.

The global lender also recommended countries develop and enforce prudential, conduct, and oversight requirements for all crypto market actors.

Countries should also establish a joint monitoring framework across different domestic agencies and authorities, IMF said. It added that countries should also develop international collaborative arrangements to enforce crypto asset regulations and monitor the impact of crypto on the stability of the global monetary system.

The global lender also recommended countries develop digital infrastructures and alternative solutions for cross-border payments and finance. This recommendation comes days after India and Singapore witnessed the UPI-PayNow linkage, allowing easy cross-border payments between the two countries.

The IMF also stated that its executive directors generally agreed that crypto assets should not be granted official currency or legal tender status to safeguard monetary sovereignty and stability.

IMF’s recommendations come after India has been batting for global cooperation and support to regulate cryptocurrencies. Last year, Union Finance Minister Nirmala Sitharaman also visited IMF, urging the lender to take the lead.

Incidentally, IMF added in the recommendations that it “could serve as a thought leader in further analytical work on rapidly evolving developments in crypto assets.”