Weekly Round-Up #40 | IMF Raises Red Flags on Cryptocurrency as Legal Tender ? ??

February 24th 2023?

IMF Draws a Line in the Sand: Warns Against Legal Tender Status for Crypto?

In a paper titled "Elements of Effective Policies for Crypto Assets," published on February 23, the International Monetary Fund (IMF) cautioned against granting cryptocurrencies legal tender status or recognizing them as official currency.

The IMF argued that giving cryptocurrencies legal status could jeopardize a country's monetary sovereignty and stability, resulting in financial and monetary stability problems. Traditional financial institutions would be exposed to volatile assets, potentially increasing their risk profiles.

If a state permits a cryptocurrency to be used as legal tender or official currency, the IMF recommends limiting its use for official payments and avoiding guaranteeing conversions from crypto to fiat currencies to reduce exposure to volatility issues. The IMF also warned that government revenues would be vulnerable to significant fluctuations if quoted in crypto, and operations are handled by state-owned enterprises.

The IMF also highlighted the importance of building strong institutions and creating policies that enhance trust in the traditional financial system to reduce the substitution of fiat into crypto assets. This requires creating a transparent, coherent, and consistent Monetary Policy Framework (MPF) to ensure the public understands policies and their impact.

The IMF emphasized that building a strong MPF would reduce currency substitution, anchor market expectations, and ensure the effectiveness of monetary policy. Additionally, the paper highlights eight other critical points for effective policy-making and regulation of cryptocurrencies.

The IMF urged countries to manage capital flows appropriately, safeguard against excessive capital flow, and regularly analyze risks stemming from crypto assets. Taxation of such assets should also be "unambiguous," and governments should establish legal certainty and proactively address the risks.

In conclusion, the IMF called for global collaboration among regulators and sovereigns to monitor how crypto assets impact other economies and develop digital infrastructure and alternative solutions that improve areas where cryptocurrency utilities outperform fiat and TradFi solutions, e.g. cross-border payments.

Catch up on our published articles for the week!

News

• Kevin O’Leary Shows Support for Crypto Regulation >>> Read more
• Police Investigate Hidden Cryptocurrency Mine Found Below Massachusetts School >>> Read more
• US SEC Objects to Binance.US’s Attempt to Acquire Voyager Assets>>> Read more
• Spotify Tests Music Playlists With Token-Enabled Features >>> Read more
• New York State Files Lawsuit Against CoinEx for Failure to Register With the State >>> Read more
• Trade Group Claims Unfair Labelling of Crypto As Securities by US SEC >>> Read more
• G20 Finance Chiefs Meet in India to Discuss Crypto, Debt and Inflation >>> Read more
• Florida Attorney Drew Hinkes Criticizes Illinois’ Bill To Prohibit Blockchain Immutability As Unworkable >>> Read more
• Selected Consumers to Participate in Russia’s CBDC Pilot Program Set to Launch in April >>> Read more
• California DPFI Launches Tracker to Spot Crypto Scams >>> Read more

Markets

• Ethereum Surges by 5% in a Week; Anticipation Builds for Shanghai Upgrade; Is $2000 in Sight for ETH? >>> Read more
• 2023 Crypto Regulation Watch: January Recap >>> Read more

Articles

• The Current State of Crypto Regulation in Australia: This article discusses Australia's plans to introduce regulatory guidelines and provisions for cryptocurrency in 2023 to build investor confidence, prevent illicit activities, and protect consumers of crypto services from experiencing financial losses.>>> Learn More
• Legalism, Ideology and Pragmatism: Unpacking the UK Government’s Crypto Regulatory Proposals: The article covers a range of proposals relating to cryptoassets, including policy objectives, definitions, activities, disclosure, trading venues, custody, lending platforms, and market abuse requirements. >>> Learn More
• Everything You Need to Know About Self-Custody Wallets: This article focuses on self-custody wallets, the recent increase in their use by crypto users, how they currently rank compared to non-custodial wallets, the events and trends that led to this surge, and the prospects for self-custody crypto wallets. >>> Learn More

In Other News…

El Salvador's big bet on bitcoin in retrospect?

El Salvador made history on September 7, 2021, when it passed the Bitcoin Law and became the first country to officially recognize Bitcoin (BTC) as a legal tender, sparking worldwide debate.

Here are some key milestones in El Salvador's BTC-as-legal-tender journey so far:?

1. El Salvador employed a pretty unorthodox approach to crypto mining, harnessing excess volcanic power instead of using traditional energy sources to mine new bitcoins.?
2. In October 2021, El Salvador successfully mined its first BTC.
3. The profits from their BTC endeavours went towards building a state-of-the-art pet hospital, offering procedures for just $0.25 worth of BTC.?
4. A bitcoin education centre was established, further promoting the adoption and understanding of the asset.
5. The country's officials invited representatives from 40 other central banks to discuss the benefits of BTC adoption.
6. In May 2022, President Nayib Bukele announced plans to build an entire city dedicated to BTC. Dubbed Bitcoin City, the project was proposed to be funded by $1 billion in BTC-backed bonds, with half allocated for BTC purchases and the rest for the city's development.?
7. Salvadoran Tourism Minister - Morena Valdez, in February 2022, noted that the country's tourism industry had witnessed a 30% growth since the adoption of BTC as legal tender.
8. In 2022, the bear market hit, and the BTC's price plunged by about 61% from its ATH. El Salvador currently sits on an unrealized loss estimated at $70 million.
9. As of November 2022, El Salvador held a stash of 2,381 Bitcoin purchased with $105 million worth approximately $41.5 million.?
10. On November 17, 2022, President Bukele announced that the nation would begin purchasing one Bitcoin (BTC) every day.

Spotlight on interesting projects?

Goracle

Goracle is the first dynamic, decentralized oracle service on the Algorand blockchain. Goracle’s purpose is to provide simple oracle solutions which assist dApps built on Algorand to access off-chain data securely, accurately, and quickly.? Goracle intends to help businesses, organizations, and users re-imagine how real-time data is directed and exchanged.

Goracle was founded by Abdul Osman who is also the CEO.

To find out more visit their website, join their Discord and follow them on Twitter and LinkedIn.

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