At the NCAER conference, IMF chief economist Gita Gopinath said that cryptos should be regulated rather than completely banned because countries would lose control of the industry if cryptos are banned.
Banning cryptocurrency isn’t a solution, Chief Economist says
According to her, banning digital assets may not be effective:
“Regulating crypto assets and currencies are essential, especially for emerging and developing economies, as banning them may not work as crypto exchanges are located offshore, which makes it easier for an individual to trade in them despite the ban.”
Cryptos pose problems because usually emerging and developing economies impose exchange rate controls, capital controls, and bank regulations: “There is a need for a global policy on it urgently as cryptos involve complex cross-border transactions: “There is a need for a global policy on it urgently.”
The IMF’s comments come at a time when both India and Russia are attempting to ban cryptocurrencies. The Economic Time reported that the Indian government could ban cryptocurrencies as payments, but would permit them to be traded and held as assets like stocks or gold. The Central Bank of Russia is considering a “complete rejection” of all cryptocurrencies.
In Russia, digital assets are used, but they cannot be used as a means of payment because the government believes they can be used for money laundering or terror financing.
Reuters reports that the regulator is currently discussing the potential ban with market participants and experts and is preparing an advisory report to convey its position on the matter. If approved, such a ban could apply to new purchases of crypto assets, but not to existing portfolios.
Russian citizens make more than $5 billion in crypto transactions annually, according to the Central Bank of Russia.
In a financial stability review published last month, the regulator said that Russians were among the most active participants in the cryptocurrency market. Russia’s top bank believes crypto’s growing popularity poses serious risks to the country’s financial stability.
The IMF announced in December that Gopnat will replace Jeffrey Okamoto as First Deputy Managing Director. She will be the first woman to hold this position. The IMF has expressed some serious concerns over El Salvador’s Bitcoin adoption.
El Salvador became the first country to recognize Bitcoin as a legal tender in September. The International Monetary Fund (IMF) warns that financial integrity, consumer protection, and financial stability are at risk.
Bitcoin’s high volatility makes its use as legal tender a risk to consumer protection, financial integrity, and financial stability, the IMF said in a statement, adding that it also creates fiscal contingent liabilities.
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