IMF sees great potential in digital money if risks are managed

A recent Reuters report has also detailed that the International Monetary Fund (IMF) is looking to intensify surveillance on digital currencies

Speaking in an exchange with The Bahamas Central Bank Governor John Rolle yesterday, IMF’s Managing Director Kristalina Georgieva opined that Bitcoin doesn’t qualify to be categorised as a currency. She argued that the US dollar triumphs as the reserve currency, regardless of its current or future form. Georgieva added that the dollar’s status would be cemented by the US capital markets and the overall economy.

The IMF executive criticised El Salvador’s Bitcoin adoption move when asked about her views on the matter. She specifically pointed out that the volatile nature of the cryptocurrency would hinder expenditure planning, tax collection and pricing of products. Like many other green energy advocates, Georgieva also picked holes in the energy consumption level of the BTC mining process.

The international institution intends to keenly monitor virtual assets in the coming days as per a policy paper posted on its site yesterday. The paper is centred on the influence and role of public and private digital currencies in the current financial systems. Reuters reported that the monetary body plans to collaborate with other institutions in the economic landscape, including central banks and regulators, to stay on top of digital money.

Just this week, the Fund warned that approving cryptocurrencies as legal tender would harm economies and also cause chaos as people would have to plump for the asset they want to hold. Although the warning didn’t mention El Salvador specifically, it seemed to reference the country’s recently passed legislation to make Bitcoin legal tender.

The Thursday policy paper also discussed the positive role that digital assets can play in the economy by offering faster and convenient payment options. It, however, held that virtual assets need to be regulated to protect economies and retain the stability of international monetary systems.  

According to a Monday blog, however, officials and staff of the institution don’t believe crypto assets have achieved maturity and, as such, can’t be adopted as national currencies. The blog post described the adoption of digital assets as a risky endeavor adding that the perils of the outcomes are far much greater than the rewards. The authors of the post set forth that although Bitcoin can be used as a viable investment to make profits, it can also result in losses. Further, they shared their concerns that cybercriminals could tap on digital assets to facilitate their activities, especially in the absence of proper regulation.