Economists with the International Monetary Fund (IMF) are calling for more proactive measures to manage the risks of crypto as several nations crack down on the industry.
In a new report, IMF’s Western Hemisphere Department division chief Mauricio Villafuerte and economists Rina Bhattacharya and Dmitry Vasilyev warn that outrightly banning crypto may have adverse 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 studies the status of crypto in Latin America and the Caribbean (LAC) region, says crypto poses problems for some nations despite the potential benefits of the new asset class.
“Crypto asset adoption also presents 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 instead of banning crypto, the economists say nations should have a policy response that takes into account what pushes the growing demand for digital assets.
“The region should instead focus on addressing the drivers of crypto demand, including citizens’ unmet digital payment needs, and on improving transparency, by recording crypto asset transactions in national statistics.”
The report says central bank digital currencies (CBDCs) present a viable option.
“If well designed, CBDCs can strengthen the usability, resilience, and efficiency of payment systems and increase financial inclusion in LAC.”
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