IMF Opposes Crypto’s Legal Tender Status for Countries

Directors of the International Monetary Fund (IMF) outline a nine-element crypto plan, that advises IMF member nations on the essential components of handling crypto assets.

The first action plan agreed upon by the directors was to protect monetary sovereignty and stability by bolstering the frameworks for monetary policy and to avoid designating crypto assets as official currencies or legal tender.

IMF’s directors believe that the crypto industry will continue to experience innovation despite the recent market downturn. Hence, there is a need to establish appropriate policies for crypto assets to prevent the future collapse of exchange platforms.

The directors generally welcomed the proposed plan and its elements after deliberating on serious concerns such as Legal risks, financial integrity, consumer protection, and market integrity.

Other recommendations in the proposal include the creation of a coordinated monitoring system that involves various domestic agencies and authorities, and the provision of legal clarity for crypto assets, amongst others.

Implications of Not Utilizing Crypto as a Legal Tender

Although the use of crypto such as Bitcoin as legal tender is a controversial topic with varying implications depending on the perspective taken. The following are some possible effects of not accepting cryptocurrency as legal tender: Increased volatility, limited acceptance, and decreased adoption.

Additionally, if cryptocurrencies are not recognized as legal tender, their acceptance may be limited to specific merchants or individuals willing to accept them as payment. Consequently, this would make it challenging for cryptocurrency owners to use their digital assets in regular transactions, hence perhaps reducing their usefulness.

While the IMF is proposing against crypto’s legal tender status, Saint Kitts and Nevis, an Island country and microstate is exploring opportunities of making Bitcoin Cash (BCH), a legal tender by March. St. Kitts and Nevis’ push to legalize BCH follows in the footsteps of El Salvador, which legalized Bitcoin in 2021.

Ukraine has also followed the path, overcoming all obstacles to ensure that cryptocurrencies flourish in the country.

Meanwhile, IMF has strongly opposed El Salvador’s decision. Consequently, both Ukraine and St Kitts and Nevis would probably encounter the same opposition if they followed the same course.