IMF Says Adoption Of Crypto Assets As National Currency Entails Risks

IMF Says Adoption of Crypto Assets as National Currency Entails Risks

Having crypto assets as the main national currency is undesirable and entails high risks for the adopting country's economy, according to the Global Financial Stability Report by the International Monetary Fund (IMF).

WASHINGTON (UrduPoint News / Sputnik - 12th October, 2021) Having crypto assets as the main national Currency is undesirable and entails high risks for the adopting country's economy, according to the Global Financial Stability Report by the International Monetary Fund (IMF).

"The adoption of a crypto asset as the main national currency carries significant risks and is an inadvisable shortcut," the report released on Tuesday said.

According to the IMF, such a decision can have a negative impact on macro-financial stability, financial integrity, consumer protection, and the environment, since the value of crypto assets is too volatile and lacks strong links with the real economic system.

Moreover, the adoption of crypto currency can create serious economic implications for the developing market, undermining the effectiveness of capital controls.

"In emerging markets, the advent of crypto assets may be accelerating dollarization and eroding the effectiveness of existing exchange restrictions and capital control management measures.

Increased trading of crypto assets by emerging market users can potentially lead to destabilizing capital flows," the report said.

However, despite these threats, the recognition of crypto assets as the main national currency is still a possible scenario in the countries with weak monetary and exchange risk policies, where it makes sense for governments to adopt bitcoin in order to improve the economic situation a little.

In June 2022, El Salvador President Nayib Bukele announced his intention to introduce legislation that will make the country the first nation to adopt crypto asset as legal currency. The government has encountered resistance from skeptical citizens, fearing bitcoin's volatility.