Establishing effective policies has become a priority for authorities amid the failure of some exchanges and collapse of certain crypto assets. The global push for clearer policies on crypto assets has gained momentum under the Indian G20 Presidency. While progress has been made, it’s important to recognize the potential risks and challenges associated with crypto.
In a recent blog post, the International Monetary Fund (IMF) expressed significant concerns about the impact of crypto on the financial system. The IMF emphasizes the need to value and protect fiat currency against cryptocurrencies, urging countries to safeguard the integrity of their financial systems to prevent them from being replaced by crypto.
The IMF sees Crypto as a major threat to the financial system
The IMF sees crypto as a major threat to the financial system, highlighting the importance of maintaining national sovereignty by not granting crypto the status of an official currency or legal tender. Doing so could potentially jeopardize financial stability or lead to rapid inflation.
Interestingly, this blog post coincides with BlackRock, the world’s largest asset manager, filing an application for a Spot Bitcoin ETF with the U.S. Securities and Exchange Commission. The IMF may view this as the possible beginning of an adoption wave that could prompt governments to adopt Bitcoin or other crypto as legal tender. It underscores the significance of Bitcoin when an institution like the IMF feels compelled to address these matters.
Tax evasion with crypto
The IMF also recognizes the implications of crypto for taxation systems. Crypto transactions, similar to cash transactions, can be hidden from tax authorities, potentially leading to significant tax evasion if tax systems are not prepared. This poses a significant threat to government revenues.
As an organization that supports countries facing financial difficulties, the IMF plays a role in improving economies and helping countries overcome financial challenges. This blog post is not the first time the IMF has warned about the dangers of crypto. Earlier this month, the IMF emphasized the need for global tax systems to prepare for the impact of crypto and prevent significant VAT evasion and other forms of tax avoidance.
Still according to the IMF, it is important for policymakers to consider these concerns and implement effective policies that address the risks associated with crypto. The IMF will continue to provide support and guidance to its member countries based on the recommendations and emerging guidelines from international standard-setting bodies. By adopting a comprehensive approach and implementing these recommendations, policymakers can safeguard monetary sovereignty, protect investor interests, and promote financial stability in the digital age.