Crypto Assets: Ban Not an Easy Solution for Making Them Illegal Tender


The International Monetary Fund (IMF) and Financial Stability Board (FSB) have urged central banks to avoid holding crypto assets in their official reserve, as they pose a risk to monetary and global financial stability. The joint report emphasised the need for an unambiguous tax treatment of crypto assets and advised countries to safeguard their monetary sovereignty.

The report warned that if crypto assets were granted legal tender status, government revenues could be exposed to exchange rate risk. It also stated that blanket bans which make all crypto-asset activities illegal may be costly and technically demanding to enforce. Therefore, the best way to limit substitution into crypto assets is to develop effective frameworks and policies.

The report called for comprehensive regulatory and supervisory oversight of crypto assets and recommended that countries should avoid large deficits and high debt levels. It also suggested that governments should minimise fiscal and operational risks in cases of official crypto asset use by keeping official payment use limited.

To guard against excessive capital flow volatility, the report suggested clarifying the legal status of crypto assets. It also warned that if interconnections between crypto-asset activities and the traditional financial system were to increase, the spill-over effects may impact important parts of traditional finance.

Finally, the IMF and FSB recommended that countries should identify and take appropriate steps to manage and mitigate money laundering, terrorist financing, and the proliferation of weapons of mass destruction risks associated with virtual assets. They also proposed building institutional capacity, enhancing global coordination, cooperation, and information sharing, and addressing data gaps.

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