International Monetary Fund (IMF) economists are calling for more proactive measures to manage cryptocurrency risks as several countries crack down on the industry.
In a new report, Mauricio Villafuerte, head of the IMF’s Western Hemisphere division, and economists Rina Bhattacharya and Dmitry Vasilyev warn that banning crypto outright could have detrimental consequences.
“While a few countries have completely banned crypto-assets given their risks, this approach may not be effective in the long run.”
The report, which examines the status of crypto in Latin America and the Caribbean (LAC), says crypto is posing problems for some countries, despite the potential benefits of the new asset class.
“The adoption of crypto assets also poses numerous challenges and risks, particularly for vulnerable LAC countries with a history of macroeconomic instability, low institutional credibility, substantial capital flows, corruption and extensive informal sectors.”
But rather than ban crypto, the economists say countries should have a policy response that takes into account what drives growing demand for digital assets.
“The region should instead focus on addressing the drivers of crypto demand, including the unmet digital payment needs of citizens, and improving transparency by capturing crypto asset transactions in national statistics. “
The report says that central bank digital currencies (CBDCs) are a viable option.
“If designed properly, CBDCs can enhance the usability, resilience and efficiency of payment systems and increase financial inclusion in LAC.”
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