Banning crypto ‘may not be effective in the long run’ — IMF

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After proposing a single ledger CBDC payment system, the International Monetary Fund reported on the regulation and use of digital currencies in Latin America and the Caribbean.

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The International Monetary Fund (IMF) has reiterated its calls for crypto regulation across certain countries but said an outright ban may not be the best approach.

In a June 22 report on Latin America and the Caribbean, the IMF pointed to various approaches taken by local governments in addressing the adoption of cryptocurrencies and central bank digital currencies, or CBDCs. Bitcoin (BTC) has been accepted as legal tender in El Salvador since September 2021, while the Bahamas was the first country to launch its own CBDC, the Sand Dollar, in October 2020.

The IMF said Brazil, Argentina, Colombia and Ecuador — whose governments’ regulation of crypto was “in progress” — ranked among the highest countries in the world for the adoption of digital assets in an effort to help the unbanked, send faster and cheaper payments, and more. In addition, according to the fund, most central banks in the region “have or are considering adopting digital currencies.”

Related: IMF envisions ‘new class’ of cross-border payment platform with single ledger

“If well designed, CBDCs can strengthen the usability, resilience, and efficiency of payment systems and increase financial inclusion in [Latin America and the Caribbean],” said the IMF. “While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run. The region should instead focus on addressing the drivers of crypto demand, including citizens’ unmet digital payment needs, and on improving transparency, by recording crypto asset transactions in national statistics.”

The IMF has often made public statements in opposition to countries adopting cryptocurrencies as legal tender. On June 19, its director of the monetary and capital markets department, Tobias Adrian, proposed a payment system that used one ledger to record CBDC transactions — an idea that received harsh criticism from many in the crypto space.

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