The IMF issues guidance on crypto assets
In 2021, El Salvador caught the world's attention when it became the first country to give Bitcoin legal tender status.
The backstory: In 2021, El Salvador caught the world's attention when it became the first country to give Bitcoin legal tender status. It was a bold move, and the Central African Republic soon followed suit. But, they are the only two countries that recognize Bitcoin as legal tender for now. Recent collapses of major crypto exchanges have shaken up the crypto world and demonstrated how volatile the market can be.
More recently: India, as the current G20 president, is leading the way in regulating digital currencies such as Bitcoin. The finance ministers from G20 countries recently came together to discuss these issues and come up with potential solutions. India even held a seminar to help G20 member states develop a common framework.
India's Prime Minister, Shri Narendra Modi, has been vocal about the need for a collective global effort to tackle the challenges posed by cryptocurrencies. But, the Reserve Bank of India has taken a firm stance against crypto, saying it should be banned because it's essentially "akin to Ponzi schemes and may be even be worse."
The development: Now, the International Monetary Fund (IMF) has rolled out a nine-point playbook to help countries tackle the cryptocurrency conundrum. The IMF recommends strengthening monetary policy frameworks and not giving cryptocurrencies legal tender status because it could threaten monetary sovereignty and stability. It also suggested setting up international arrangements to supervise and enforce regulations and keeping tabs on the impact of crypto on the global economic system.
"In that world of private issuances, there has to be more regulation," said Kristalina Georgieva, IMF Managing Director, at the G20 meeting.
"In addition to evaluating the consequences of crypto assets to the broader economy, there is also an existential question on whether crypto assets are indeed the optimal solution for existing challenges in global financial systems," India said in a statement.
"We haven't suggested outright banning of crypto activities, but it is critical to put in place a strong regulatory framework," said Janet Yellen, US Treasury Secretary, to Reuters. "We're working with other governments."