IMF lays out crypto action plan, recommends against legal tender status

LONDON  – The International Monetary Fund has laid out a nine-point action plan for how countries should treat crypto assets, with point number one a plea not to give cryptocurrencies such as bitcoin legal tender status.

The global lender of last resort said its Executive Board had discussed a paper, “Elements of Effective Policies for Crypto Assets,” that provided “guidance to IMF member countries on key elements of an appropriate policy response to crypto assets.”

Such efforts have become a priority for authorities, the fund said, after the collapse of a number of crypto exchanges and assets over the last couple of years, adding that doing nothing was now “untenable”.

The top recommendation was to “safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.”

The IMF had hit out at El Salvador in late 2021 when the central American country became the first to adopt bitcoin as legal tender, a move that has since been copied by Central African Republic.

Other advice on Thursday’s list, which comes as G20 decision makers meet in India, included guarding against excessive capital flows, adopting unambiguous tax rules and laws around crypto assets, and developing and enforcing oversight requirements for all crypto market actors.

Countries should also establish international arrangements to enhance supervision and enforce regulations, the IMF added, as well as set up ways to monitor crypto’s impact on the stability of the global monetary system.

Outlining its Executive Board’s assessment, the IMF said directors welcomed the proposals and agreed the widespread adoption of crypto assets “could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks.”

They “generally agreed,” too, that crypto assets should not be granted official currency or legal tender status, and though strict bans of assets are “not the first-best option,” a few directors thought they should not be ruled out.