The International Monetary Fund (IMF) has consistently expressed opposition to the widespread popularity and, in certain instances, legal adoption of cryptocurrencies across nations.
Reiterating its stance, the IMF has said that privately issued cryptocurrencies threaten financial stability and should be governed by more stringent rules.
- Managing director of the IMF, Kristalina Georgieva, speaking on Dec. 14 at an international conference on digital money, pointed out the recent controversies around the founders of two prominent crypto exchanges, Binance and FTX.
- According to her, the indictment of Sam Bankman-Fried and Changpeng Zhao highlights the “Wild West” lawlessness and illicit activity surrounding unregulated crypto.
- Georgieva added that most crypto assets do not offer stability, and issues around crypto-enabled money laundering activities have tainted its reputation.
- She advocated for countries to adopt stricter rules, including refusing to recognize the asset class as legal tender or official currency.
- Cryptocurrencies are a barrier to the effective transmission of monetary policy; they undermine macro-financial stability, and as such, they should not be embraced, the IMF boss said.
- Instead, Georgieva endorsed blockchain technology — the fabric upon which cryptocurrencies are woven — and encouraged its adoption into traditional finance systems.
- She added that banking infrastructure built on blockchain could help cut costs and boost speed while allowing for interoperability.
- In place of privately issued digital currencies, Georgieva advocated for “safe money” — central bank digital currencies — as the medium of transaction on traditional financial infrastructure built on blockchains.
- She said:
“Most crypto assets arrived on the financial scene “unbacked” or “poorly-backed” — lacking intrinsic value and suffering from price volatility. Some of them collapsed because of reliance on shaky reserves. Crypto assets were really risky assets.”
- On the IMF’s stance on more vital crypto rules, she said:
“Our goal is to make a more efficient, interoperable, and accessible financial system by providing rules to avoid the risks of crypto and infrastructure by leveraging some of its technologies.”
- Many African countries have existing arrangements with the IMF and have begun to formulate and adopt rules to guide cryptocurrencies within their borders.
- South Africa has all but given legal status to the asset class, enlisting crypto companies as accountable institutions and mandating crypto exchanges to secure licenses.
- Earlier this week, Angola passed regulations seeking to criminalize crypto mining and restrict the use of privately issued cryptocurrencies into law.
- Other African nations such as Ghana, Kenya and Morocco are closing in on regulations for virtual assets.
- The Central African Republic remains the only African country to declare a privately issued cryptocurrency, bitcoin, as legal tender.
- The move was stiffly opposed by international organizations, including the Economic and Monetary Community of Central Africa (CEMAC).
- Earlier this year, CAR’s president, Faustine-Archange Touadera, said his country will review the law that makes bitcoin legal tender following mounting pressure to reverse the legal status conferred on the asset class.