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IMF criticizes Bitcoin adoption, warns of crypto as a means of payment

All IMF arguments can be boiled down to fear of losing control over world's monetary system

30.Aug.21 8:55 AM
By All IMF arguments can be boiled down to fear of losing control over world's monetary system
Photo IMF


IMF criticizes Bitcoin adoption, warns of crypto as a means of payment
The International Monetary Fund (IMF) tweeted that they are concerned that countries are accepting bitcoin and other cryptocurrencies as legal means of payment. The tweet says among other things:

'Crypto assets like bitcoin carry significant risks. To equate them with a national currency is an inadvisable shortcut.’

The IMF seems to be concerned about the growing number of countries that recognise bitcoin as a national currency, for example in El Salvador. Recently, Honduras has installed its first crypto ATM this week, while Cuba is the next country to recognize and regulate cryptocurrencies like Bitcoin.

The latter, of course, suffers from monetary oppression by the US. America has imposed an embargo on Cuba, which in practice amounts to a ban on international trade and international transfers of funds. With bitcoin and other cryptocurrency, Cuba could bypass this embargo.

'Some countries may be tempted by a shortcut crypto assets as national currency. Many are indeed safe, easily accessible and cheap to carry out transactions. However, we believe that in most cases the risks and costs do not outweigh the potential benefits.’

The IMF also wrote about the potential of cryptocurrency: ‘they have the potential to increase financial inclusion, improve the competitiveness of payment providers and enable cross-border transactions.’ But all of these benefits have an asterisk, of course. The IMF stresses that using crypto's is not as easy as it seems.

For example, they write that there are huge costs involved and that difficult decisions need to be made, such as ‘defining the role of both the public and the private sector in providing and regulating digital assets.’

Depending on how you use crypto, the volatility of the prices at this stage of adoption is a blessing or a curse. Bitcoin goes up and down, which is very useful as an investor and trader. But as a means of payment this becomes a lot more difficult, but not if everything is counted in BTC. The world is far from that.

A few more gems from the IMF blog. The adoption of cryptocurrencies poses major threats to macro-financial stability and integrity, consumer protection and Environmental Protection.

'Cryptos like bitcoin that are mined need a huge amount of electricity to power the computer networks that authenticate transactions. The ecological implications of adopting these cryptoassets as a national currency can be dire.’

If the Coronas card cannot be drawn, then bingo is played with numbers from the climate card.

In conclusion, the IMF seems to agree with the problem definition and recognises that the current monetary system is not perfect. They also agree with the abstract solutions, but not with the chosen path. They believe that governments should use new digital forms of money to provide better services while maintaining stability, efficiency, equality and environmental sustainability.

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