Crypto

IMF Says an Outright Ban on Crypto Would be Unwise

06/24/2023
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The International Monetary Fund (IMF) argued about crypto regulations and asserted that an outright ban would have long-term consequences. In a report on Latin America and the Caribbean (LAC) released on June 22, 2023, the agency argues that approaches taken by local governments towards Central Bank Digital Currencies (CBDCs) and digital asset adoption are commendable. 

Banning Crypto Might Not Be the Answer – IMF

The current global regulatory scenario surrounding the digital asset industry is ambiguous. However, jurisdictions like the European Union, the United Kingdom,  and Hong Kong are way ahead in the race to provide a clear regulatory framework for digital assets. The United States, with its recent crackdown against the industry, has proven itself to be hostile towards digital assets. 

Every major nation is exploring the possibilities of Central Bank Digital Currencies (CBDCs), while some are looking to accept Bitcoin as legal tender. El Salvador pioneered the acceptance of BTC as legal tender in 2021, while the Bahamas became the first country to launch its own CBDC, Sand Dollar, in October 2020. 

The IMF pointed out that Argentina, Brazil, Ecuador, and Columbia have regulations regarding digital assets in the making. Nevertheless, they rank among the countries with the highest adoption of digital assets. This is because they not only offer unbanked, faster, and cheaper payment options,  but also because major central banks in the region are actively exploring CBDCs. 

The reason behind the crackdown against digital assets in various countries is to safeguard citizens against unregulated financial instruments. Most countries have strict anti-money laundering (AML) laws for the industry. Such an approach offers a multitude of benefits but comes with some underlying flaws. 

While the development regarding its regulation is underway, countries like China, Bangladesh, Indonesia, Egypt, and others have placed an outright ban on crypto. Although they argue that it is a method to safeguard their economy and citizens, the IMF argues that the decision might have consequences in the long run. 

Earlier this year, the agency advised against making cryptocurrencies legal tender. However, on June 19, 2023, the monetary and capital market director, Tobias Adrian, suggested a system using a single ledger to record CBDC transactions globally. This is an idea that could be beneficial to the digital asset community. 

Beneficiaries in the U.S. War Against Crypto

The current regulatory crackdown on the digital asset industry, especially by the United States Securities and Exchange Commission (SEC), increased by 183%, following  the regulatory crackdown against FTX.  This is forcing companies to move offshore, and it is worth questioning who this is benefitting. 

The European Union, with its upcoming set of regulatory standards, Market in Crypto Assets (MiCA) could emerge as the go-to option for the industry players to relocate. The E.U. market for digital assets is approximately 14%, a figure that has garnered the interest of digital asset companies. 

Coinbase Chief Legal Officer Paul Grewal thinks that the regulatory crackdown in the U.S. could be beneficial for Europe, and especially Ireland.  

The upcoming MiCA regulations are expected to be effective from December 30, 2024, and are already being published in the Official Journal of the European Union (OJEU). A consultation process will start in July 2023, but experts argue that its implementation will be a hassle. 

Dealing with digital assets is like fighting with a double-edged sword. It is essential to regulate them, but an outright ban from any country might prevent them from benefitting from its immense possibilities.

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Source: https://www.thecoinrepublic.com/2023/06/23/imf-says-an-outright-ban-on-crypto-would-be-unwise/