The International Monetary Fund (IMF) has recently called upon the Central African Republic (CAR) to reconsider its decision to adopt Bitcoin as legal tender.
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The CAR, a landlocked nation in Central Africa, made headlines earlier last year when it embraced the decentralized crypto, Bitcoin. At the time, the IMF claimed that the move could have a negative impact on the country’s economic and financial stability.
In a recent report, the IMF argues that the legislation introduces a number of risks and legal problems, including macro-fiscal, and financial integrity threats. As a result, the association is requesting the CAR to withdraw its Bitcoin legal tender status and guaranteed convertibility for crypto assets.
Concerns About Projected Economic Growth and Inflation
Interestingly, the IMF predicts that the CAR economy will grow by 2.2% this year and 3.0% next year. This positive outlook is an encouraging sign for the country’s development.
However, inflation remains a concern, with forecasts of 6.3% exceeding the 3% objective. The IMF recognizes the problem but predicts a gradual drop to 2.5% by 2026.
Concerns About Financial Stability
In the report, the IMF raised concerns about the possible financial stability risks associated with crypto’s legal tender status. The absence of centralized management and regulation, combined with their volatile character, can jeopardize the stability of the CAR’s financial system, according to the IMF.
Notably, the organization highlighted that traditional instruments used by Central Banks to manage financial stability, such as interest rate changes and currency interventions, may become ineffectual in the face of Bitcoin volatility.
IMF’s Criticism Towards Sango
Furthermore, the international body also directed its criticism towards Sango, the digital currency project launched by President Faustin-Archange Touadéra of the CAR.
The IMF stated that the initiative aimed to tokenize the country’s national resources has experienced a remarkable failure. According to reports, CAR has sold less than $2 million worth of Sango tokens, accounting for only 0.2% of total anticipated sales.
The Role of IMF in Financial Governance
As digital assets gained importance, the IMF realized the need to address their influence on economies and financial stability, leading to an expanded involvement in digital asset legislation. For instance, the IMF made a demand for stronger consumer protection laws in Africa, following the collapse of the defunct FTX exchange.
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