UpdatesFeb 25, 2023

Cryptocurrencies should not be legal tender, says the IMF

The IMF once again expressed its concerns about virtual currencies.

In the opinion of the board of the International Monetary Fund (IMF), cryptocurrencies should not be given the status of legal tender. In their view, this asset class poses significant risks to monetary policy, tax collection, financial stability and consumer protection.

Cryptocurrencies should not be used as legal money, says the IMF

Although the UN organization dealing with global financial stabilization issues realizes that regulations should not stifle innovation and that governments can benefit from the opportunities created by digital technologies, it also believes that cryptocurrencies should not be allowed to acquired the status of legal tender.

In recent years, the adoption of virtual currencies has accelerated significantly. For example, in 2021, El Salvador promoted Bitcoin (BTC) to the same league as the US dollar. Making payments in this cryptocurrency has been completely legalized in this country. The next country accepting BTC in 2022 became the Central African Republic.

The large fluctuations in the cryptocurrency asset market, which were particularly visible last year, mean that many participants in the cryptocurrency sector do not consider using them to make payments to be a good choice, especially for everyday expenses.

According to a recent publication on the risks of digital currencies, IMF directors do not consider it prudent to grant cryptocurrencies the status of official currency or legal tender. In their opinion, this affects the protection of sovereignty and monetary stability.

Council members added that a total ban on digital currencies cannot be introduced either. However, they suggested that this industry needs certain restrictions and precise legal regulations.

More and more people are reaching for virtual currencies

Cryptocurrency adoption seems to be deepening despite measures taken by some governments to suppress their development. In recent years, Bitcoin, as the largest and oldest of the cryptocurrencies, has attracted the attention of many institutional investors who have invested their capital in it. An example of a well-known corporation buying BTC is, for example, MicroStrategy.

Despite the visible rebound on the charts of the leading digital currencies, which appeared at the stage of January this year, they are still a huge gap from the price records from 2021. A series of spectacular bankruptcies in the cryptocurrency sector caused panic among investors. The recent recovery, however, has restored optimism among some industry participants.