IMF: Bitcoin (BTC) as legal tender is risky
Digital assets adopted as national currencies or legal tenders are likely to undermine macroeconomic stability, as stated by Tobias Adrian, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department, and Rhoda Weeks-Brown, General Counsel and Director of the Legal Department.
Beware of legal crypto
The authors hold that “new digital forms of money” contribute substantially to payment speed, expand access to financial services and facilitate cross-border transfers. Nonetheless, introduction of cryptos as legal tenders is associated with “difficult policy choices” and significant investment.
“Some countries may be tempted by a shortcut: adopting cryptoassets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits,” IMFBlog reads.
Representatives of the IMF referred to Bitcoin volatility in particular, claiming the asset is “speculative”. Countries determined to legalise the coin put their citizens at grave risk, as digital assets are a perfect tool for scammers and a severe threat to the environment.
“Mined cryptoassets such as Bitcoin require an enormous amount of electricity to power the computer networks that verify transactions. The ecological implications of adopting these cryptoassets as a national currency could be dire,” the authors noted.
The IMF concluded that opting for international reserve currencies like EUR or USD “even in relatively less stable economies” turns out “more alluring” than adopting crypto.
Earlier, the IMF saw a number of regulatory problems in the Bitcoin payments legalisation by El Salvador. The bill on adopting BTC as legal tender was introduced by the country’s parliament in early June and is expected to enter into force on 7th September, 2021.
The opposition parties called this decision unconstitutional. The initiative wasn’t truly welcomed among local money-transfer services, as only a few did integrate Bitcoin support into their ecosystems.
The International Monetary Fund has published an article revealing the true price of adopting crypto as legal tender. Although embracing digital assets proves to be quite beneficial for the public, fraud risks and lack of sustainability are issues of major concern. Bitcoin adoption in El Salvador still sparks doubts among international organisations, while the crypto world is waiting for September to prove them wrong.
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