The International Monetary Fund (IMF) recently expressed its concerns about the risks associated with cryptocurrencies, particularly Bitcoin, and advised central banks against accepting them as legal tender.
While cryptocurrencies, including Bitcoin and other digital assets, offer a decentralized means of transferring value without intermediaries, their extreme volatility renders them unsuitable for direct use in payment services.
In a recent report, the IMF urged central banks to protect fiat currencies from potential threats posed by cryptocurrencies.
The IMF emphasized the need to avoid allowing crypto assets to compete directly with established fiat currencies, as such competition may introduce various financial stability risks and exacerbate inflationary pressures.
Also read, Adoption of CBDC May bring Hidden Risks – IMF Director
The IMF also noted that some governments have started accepting Bitcoin and Ethereum for tax collection, fines, and debt payments.
This practice raises significant concerns for the IMF, as it may introduce additional challenges, including financial instability and rapid inflation.
Earlier, the IMF advised countries to modernize their tax collection systems to encompass the crypto sector. This step would facilitate the proper collection of taxes from crypto businesses and related activities.
Notably, the IMF had previously expressed reservations about El Salvador’s decision to adopt Bitcoin as legal tender in September 2021, cautioning against the potential threats it might pose to the country’s fiscal sustainability, consumer protection, financial integrity, and overall stability.
Despite various challenges, the IMF continues to underscore the importance of preserving the stability and reliability of fiat currencies while treading cautiously in the realm of cryptocurrencies.
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