According to the IMF, government-issued fiat money should always be prioritised above digital assets.
In a recent blog post, the International Monetary Fund (IMF) implores nations to keep their financial systems secure so that crypto-assets don’t displace them.
Maintaining strong, reliable, and competent domestic institutions is the best defence against the replacement of sovereign currencies. A successful solution to the difficulties presented by crypto assets requires monetary policy frameworks that are transparent, consistent, and coherent.
The IMF warns nations against making cryptocurrency legal tender for these and other reasons. “To safeguard national sovereignty, it is crucial that cryptocurrencies not be recognised as legal cash. To do so would necessitate its acceptance in many countries for tax payments, penalties, and debt settlements, and might create budgetary concerns for government budgets, undermine financial stability, and cause fast inflation.”
The IMF acts as a bank, lending money to countries that are having financial problems. If a country is having trouble meeting its debt obligations, for instance, the IMF may step in with emergency funding. The IMF also offers advice to nations on how to better their economies.
Similar to cash transactions, cryptocurrency deals may be concealed from tax authorities. Currently, just a tiny fraction of all purchases are performed using cryptocurrency. However, unprepared tax systems may one day lead to widespread VAT and sales tax evasion, which would significantly reduce government income. Perhaps the most serious danger posed by crypto is this.
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