The International Monetary Fund (IMF) says that sovereign fiat currency should always be valued and protected over crypto assets.
In a new IMF blog post, the global bank encourages countries to maintain the integrity of their financial systems in order to prevent them being replaced by crypto assets.
“The defense against the substitution of sovereign currencies is the maintenance of robust, trusted, and credible domestic institutions. Transparent, consistent, and coherent monetary policy frameworks are crucial for an effective response to the challenges posed by crypto assets.”
For these reasons and more, according to the IMF, countries must avoid deeming crypto as legal tender.
“To protect national sovereignty, it is important not to grant crypto assets official currency or legal tender status. Doing so would require accepting them in many jurisdictions for tax payments, fines, and debt settlements, and could generate fiscal risks for government finances, and could threaten financial stability or rapid inflation.”
The IMF functions as a bank for nations, assisting with financial difficulties. For instance, if a nation is struggling to pay its debts, the IMF can offer financial aid. Additionally, the IMF guides countries on ways to enhance their economies.
This is not the first time the IMF has warned against crypto in relation to taxes.
Earlier this month, the IMF said that global tax systems should be modernized to accommodate crypto assets.
“Crypto transactions have similarities to those in cash in their potential for being hidden from tax administrations. Today, the share of purchases made with crypto is still small. But widespread use, if tax systems were not prepared, could someday mean widespread evasion of VAT and sales taxes, leading to materially lower government revenues. This may be the biggest threat from crypto.”
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