As global regulatory uncertainty continues to cloud the crypto industry, the International Monetary Fund (IMF) has suggested that completely banning digital assets may not be a sustainable or efficient strategy to address the risks they present.
"While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run," the IMF stated.
The IMF advised nations to address the root causes of the demand for cryptocurrencies.
This entails catering to the populace's digital payment needs, fostering transparency, and other similar aspects.
It also suggested incorporating crypto transactions into national statistics to facilitate the regular evaluation of traffic and demand.
The IMF paper referenced a report by Chainalysis, highlighting the burgeoning adoption of cryptocurrencies in Latin American countries such as Brazil, Argentina, Colombia, and Ecuador in 2022.
These nations were among the top 20 globally in terms of crypto adoption.
The paper expounded on the allure of digital assets, stating, "They seek the benefits that digital assets claim to offer, including protection against uncertain domestic macroeconomic conditions, circumvention of capital controls, improved financial inclusion for unbanked populations, cheaper and faster payments, and stronger competition."
However, it is important to acknowledge that some countries, like Argentina, which banned payment providers from offering crypto transactions in May 2022, have been cautious due to apprehensions over the impact of cryptocurrencies on financial stability, currency substitution, tax evasion, corruption, and money laundering.
But, the IMF contends that well-constructed regulations could be a lifeline in such instances.
The paper revealed that at the time of its survey in mid-2022, 12 out of the 19 jurisdictions examined in the Latin American region either had specialized regulatory frameworks in place or were developing them.
As per the IMF, such regulatory measures have shown positive outcomes in addressing risks related to financial stability, currency substitution, and corruption.