IMF Warns Crypto Evades Taxes, Threatens Financial Stability
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A report written by the International Monetary Fund (IMF) warns that the rise of cryptocurrency popularity poses new challenges to financial stability.
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Cryptocurrency is not within the financial giant's grip.
The International Monetary Fund (IMF) warns that the rise of cryptocurrency popularity poses new challenges to financial stability.
A report released on Friday wrote that “Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.” The warning was issued on the same day US president Joe Biden announced the assembly of a 30-country meeting to discuss law enforcement regarding cybercrime.
Given the decentralized nature of digital currency and the systems through which they function, central banks and financial institutions grapple with executing monetary policies, which would potentially threaten the "free" and accessible sentiment of cryptocurrency.
While global economic crises are on the rise, many have looked to cryptocurrency as a hedge against inflation. Others, on the other hand, enjoy the thrill of the high-risk investment market. Meanwhile, the IMF look into "consumer protection," especially that state-level ransomware attacks and theft have shot up recently.
The report says that cryptocurrency may take the place of fiat currency, which will become problematic to the international financial system: “Looking ahead, widespread and rapid adoption can pose significant challenges by reinforcing dollarization forces in the economy — or in this case cryptoization — where residents start using crypto assets instead of the local currency.”
The Fund proposes a solution for fiat replacement: "Globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap.”
The IMF, furthermore, expressed anxieties that cryptocurrency assets evade taxation, and thus may need regulators' intervention. They detailed, "As a first step, regulators and supervisors need to be able to monitor rapid developments in the crypto ecosystem and the risks they create by swiftly tackling data gaps."
