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Does the IMF have a vendetta against cryptocurrencies?

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Is the International Monetary Fund (IMF) really hostile to cryptocurrencies? Many in the cryptocurrency and blockchain space think so. in January, Fund to El Salvador drop bitcoin (Bitcoin) as legal tender.

Reportedly in May Pressured Argentina To Cut Crypto Trading In return for an IMF loan extension, and recently warned the Marshall Islands: Procurement of digital currency A move to fiat currency status could “increase risks to macroeconomic and financial stability and financial health.”

Prochain Capital President and Co-Founder David Tawil told Cointelegraph, “I am convinced that the IMF is a relentless enemy of cryptocurrencies.” Given that bitcoin and other cryptocurrencies are “issued” by non-state institutions and cross borders, “cryptocurrencies have the potential to become ubiquitous, greatly reducing the need for the IMF.” said the United Nations financial institution.

Alex Gladstein, chief strategy officer at the Human Rights Foundation, said: “Bitcoin is against everything the IMF supports. Said Politico in June. “It’s outside money beyond the control of these alphabet soup organizations,” Kraken’s Dan Held simply said. murmured“IMF is evil”, in response to reported IMF actions in Argentina.

Still, the multilateral lender, which serves about 190 countries and has long been a lightning rod for criticism in the developing world, may have a more nuanced view of cryptocurrencies. Some people believe

A broader view of crypto assets?

In its September report “Cryptocurrency Regulation,” the IMF said: Looked The existence and proliferation of non-governmental digital currencies is not problematic. In fact, it called for a “global regulatory framework” for cryptocurrencies to bring order to the market and “provide a safe space for useful innovation to continue.”

“The IMF has a very broad view of cryptocurrencies,” John Kiff, managing director of the CBDC think tank and senior financial sector expert at the IMF until 2021, told Cointelegraph. . Recent examples listed above. he added:

“The Marshall Islands and El Salvador opinions were about governments adopting cryptocurrencies as legal tender when the monetary unit was already well established. It focused on the macroeconomic implications of hooking their financial wagon to cryptocurrencies.”

Josh Lipsky, senior director of the Atlantic Council’s Center for Geoeconomics, said institutionally, “it is true that the IMF is skeptical of cryptocurrencies, which has hit El Salvador hard.” said. But that was because the Fund was concerned about the financial vulnerability of the country’s economy.If El Salvador refuses to pay its international debt, the IMF “must bail them out”.

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On the other hand, “Argentina has over 20 loan programs over the years and cannot go back to the IMF to renegotiate. [its loans] We are also doing crypto experiments,” added Lipsky, a former IMF adviser and speechwriter for Christine Lagarde. The mayor of Buenos Aires, a cryptocurrency supporter, Reported to be moving forward with plans This will allow city residents to pay city taxes in cryptocurrencies. “It raised eyebrows,” Lipsky commented on his fund.

Even Tawil agreed that the IMF is justified in certain circumstances to force “certain policy choices that are economically unsupportable, such as austerity, taxation and the end of government subsidies.” If the Fed “does bad policies” that make it permanently dependent on IMF support, “the IMF will use its lending capacity to influence policy choices.”

Money laundering risk

Regarding the Marshall Islands’ bid to introduce a sovereign digital currency, known as SOV, as a second legal tender, IMF’s Yong Sarah Zhou said: Quote Not only is financial stability at risk, but so is “combating anti-money laundering and terrorism financing (AML/CFT) risks”.

However, Netherlands-based payments and blockchain regulatory consultant Simon Leliebert was unsure if this was the fund’s main objection. Yes, crypto “can be used as an investment asset and also as a tool for money laundering. intergovernmental organisations. task force.

Developing country governments sometimes feel “suppressed by IMF arbitrage and neoliberal dogma” and are tempted to “escape from IMF shackles” by using alternative fiat currencies. It’s their power,” he told Cointelegraph.

A case of misunderstanding?

El Salvador was the first country in the world to adopt Bitcoin and other cryptocurrencies as legal tender in September 2021. “What Terra Luna did for cryptocurrencies in the U.S. is what El Salvador did for cryptocurrencies around the world.”

what went wrong? “There were a lot of mistakes, but if I had to pick one, it would be how rushed it was.” There was a “paper-thin two-page explanation.” [Bitcoin] It will work.” And that was it.

Starting with small pilots and independent risk assessments rather than adopting an experimental approach, Bitcoin legislation hastily been implemented through El Salvador’s parliament and has been “reckless and hasty.” according to to a critic.

In Lipsky’s view, the IMF’s wariness of crypto as fiat currency deepened in the wake of El Salvador’s inappropriate BTC launch.

Still, institutions like the IMF and World Bank undoubtedly have “enormous clout” in small countries seeking more control over their currencies, and “don’t want aid unless countries comply with their demands.” Pressure can range from making conditions conditional to simply blocking aid requirements,” writes Henri Arslanian in a recently published book. cipher book.

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For example, when El Salvador recognized bitcoin as legal tender, the World Bank, another lender of the United Nations system, not only criticized the move, but also said, citing environmental and transparency concerns, that technical assistance ,” Arslanian wrote.

Natural enemy?

Given the mandate of non-governmental organizations such as the IMF and World Bank, broadly speaking, it is to support global financial stability and promote economic growth in developing countries. It is often a volatile and difficult-to-manage financial instrument with no return address or even an identifiable contact person.

As Tawil pointed out, the IMF is often called upon to deal with economies “plagued by corrupt and incompetent leaders and illusory currencies,” so it “does not seek another ‘issuerless’ currency.” There is really no incentive to add.

“The IMF cannot ignore the reality that our future will be filled with cryptocurrencies.”