By Michael Scott
The International Monetary Fund (IMF) is disassociating from the initial stance advocating for countries to consider imposing crypto bans. The IMF is suggesting that imposing digital assets bans is no longer effective.
The Bretton Woods Institution urges countries to consider rescinding the crypto bans as prohibitions are wrong.
IMF Distances From Calls to Banning Cryptos
The Thursday, June 22 publication by IMF economists to assess the crypto usage within Latin America and the Caribbean portrays detachment from the initial position.
The report shows that the acceptance levels vary in the region, with El Salvador emerging as a leading jurisdiction that openly adopted Bitcoin. El Salvador has been rallying the uptake of Bitcoin in the country since its approval as a legal tender. Other countries, such as Fiji, are still in the infant stage of adopting bitcoins. The economists lean towards adopting cryptocurrencies though guided by the well-regulated framework.
The report challenges the few countries, such as China, that issued total bans against the crypto assets used to reconsider the approach as it is proving ineffective in the long run. The economists cite the longevity proved by various crypto projects to dismiss the alleged risks.
IMF Consensus Leaning Towards Improving Regulations
The swift change in the IMF stance from a directive supporting banning cryptocurrencies to one favoring regulations months later led to a realization of digital assets’ longevity. It is possible that the perspective to issuing a prohibition against crypto existed only among the handful of directors on the IMF board. Nonetheless, the consensus leaned toward improving regulations over imposing bans.
IMF managing executive Kristalina Georgieva held that crypto bans should be enforced when digital assets threaten financial stability. In an interview convened by Bloomberg, the executive considered that improved regulation would remain a priority favored by the IMF, Bank for International Settlements, and Financial Stability Board (FSB).
Latin America Region Leads in Global Crypto Adoption
The report issued by IMF economists emphasized that the South American and Caribbean region leads to increased crypto adoption. A review of Latin American countries positions Brazil, Colombia, Ecuador, and Argentina among the top twenty leading nations with global adoption of digital assets.
The IMF economists led by Rina Bhattacharya and Dmitry Vasilyev consider the crypto assets as safeguarding the countries against uncertain macroeconomic conditions. Also, they held that they facilitate financial inclusion in areas with unbanked populations, overcome capital controls and enable cheaper and quicker payments.
A review of the adoption of central bank digital currencies (CBDCs) revealed varying adoption in Latin and South America. The respondents in the survey indicated that half of the jurisdictions were evaluating retail and institutional options. The respondents indicated that CBDCs emerged to nurture resilience within communities susceptible to natural disasters. It delivers a mechanism to accomplish financial inclusions within the remote region.
Brazil’s CBDC in Advanced Stage
Economics observed that the Bahamas is the pioneer nation to introduce CBDC since the release of Sand Dollar in 2020. Jamaica replicated the move with the Eastern Caribbean Currency Union (ECCU).
Extending the assessment scope to South America shows Brazil’s CBDC is within the advanced proof-of-concept phase. Also, the country is considering asset tokenization by converting assets, including real estate and commodities, to have digital representations that are easier to transfer and boost liquidity.
The economists observed that most Latin American countries are researching CBDCs, though, with others advancing to the experimental stage. The report portrays Brazil as the leading economic powerhouse, launching CBDC in 2024, whose trials started in 2020.
The IMF recognizes the existence of difficulties by the countries in their attempt to integrate cryptos into their economies. Argentina recently prohibited payment platforms from providing cryptos to customers through its central bank.
El Salvador is battling several challenges despite granting Bitcoin legal tender status. The IMF economists noted that El Salvador is witnessing scarce utilization of Bitcoin.