- The IMF has proposed a nine-point action plan on how countries should treat crypto assets.
- The international finance agency has recommended that countries not give any crypto asset a legal tender status.
- The recommendations from the IMF follow India’s advocacy for international collaboration and support to regulate cryptocurrencies.
The International Monetary Fund (IMF) has proposed a nine-point action plan on how countries should treat crypto assets. The international finance body has put forth how nations should handle crypto assets. The IMF has advised governments against designating any cryptocurrency asset to the legal tender status.
The IMF executive board reportedly addressed a paper titled “Elements of Effective Policies for Crypto Assets” on Thursday, February 23. It was intended to guide IMF member countries on the essential components of an effective policy response to crypto assets.
The global lender said:
“The paper’s objectives align with the IMF’s mandate to support economic and financial stability across its membership.”
It further stated that with the failure of numerous cryptocurrency exchanges and assets over the previous few years, such initiatives have now taken prominence in the eyes of the authorities.
IMF stated:
“Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn,”
IMF’s Crypto Recommendations In Nine Points
The IMF’s main recommendation was to “protect monetary sovereignty and stability by strengthening monetary policy frameworks and not to grant crypto-assets the status of official currency or legal tender.”
A few countries have embraced Bitcoin and other cryptocurrencies and given them legal tender status. For example, El Salvador, which the IMF criticized for accepting Bitcoin as a legal tender, was the pioneer, with the Central African Republic following suit.
The global lender also recommended implementing precise tax classification for cryptocurrency assets, avoiding excessive capital flow volatility, and preserving the efficiency of capital flow management measures.
Countries were also advised to establish and implement prudential, conduct, and supervisory standards for all participants in the cryptocurrency sector.
The IMF also said countries should “establish a joint monitoring framework across different domestic agencies and authorities.” It added that government bodies need to create collaborative international agreements to implement laws governing crypto assets and track how they affect the stability of the global monetary system.
The global lender advised countries to create digital infrastructures and other cross-border payment and financing options. The UPI-PayNow linkage, which facilitated simple cross-border payments between India and Singapore, was witnessed just days before this recommendation.
The IMF said directors supported the ideas and concurred that the widespread use of crypto assets “could undermine the effectiveness of monetary policies, circumvent capital flow management measures, and exacerbate fiscal risks.”
The IMF further noted that its executive directors generally agreed that crypto assets should not be given official currency or legal tender status to protect monetary sovereignty and stability. Additionally, crypto asset bans should not be ruled out even though they are “not the first-best option,”
The IMF recommendations come as India intensifies its efforts to regulate cryptocurrency. Ajay Seth, India’s federal economic affairs secretary, previously stated that the G20 nations are attempting to agree on a crypto asset policy to create better global regulation. Additionally, he added that the Indian government hopes to come to an agreement when it hosts the G20.
