The International Monetary Fund (IMF) said it is too early to make cryptocurrencies like bitcoin, ethereum, and bitcoincash among others a legal tender.
For instance, BTC price broke above $50,000 for the first time in history on Tuesday, February 16, 2021, a price it couldn’t sustain due to its volatility.
A report which was published in 2020 predicted that the bitcoin price may reach $341,000 by 2025 and by 2030, it may reach $397,727 to 1BTC, the forecast can be found at: https://infomediang.com/bitcoin-predictions
But IMF financial counselor and director of the Monetary and Capital Markets Department, Tobias Adrian, and general counsel and director of Legal Department, Rhoda Weeks-Brown, said the move by some countries to upgrade crypto to the status of legal tender isn’t the best.
In a blogpost titled, “As national currency, crypto assets – including bitcoin – come with substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment,” the two monetary experts highlighted some of the damages adoptions of crypto as a legal tender may cause the developing economy.
Summary of the reasons why IMF believed that cryptocurrencies cannot be a legal tender are:
1) Cryptocurrency may not meet up with countries that have stable inflation and exchange rates, and credible institutions.
2) The value of cryptocurrency is too volatile and unrelated to any country’s real economy even if they are given the legal tender status
3) The adoption of cryptocurrencies by countries which is economically unstable would trigger and cause a reduction in government revenue
4) Cryptocurrency cannot ultimately guarantee consumer protection if countries rush to adopt it as their legal tender
5) Households and businesses would be affected because they have very little incentive to price or save in a parallel crypto asset.
The IMF top executives jointly described such a move as a “A step too far, saying it doesn’t see cryptocurrencies catching on as national currencies.
Citing some of the benefits of digital currencies, it however advised countries to take caution.
Some of the advantages of a cryptocurrency over fiat money are:
- potential to provide cheaper payments,
- Ability to provide faster payments
- enhance financial inclusion
- improve resilience
- competition among payment providers,
- facilitate cross-border transfer
Bitcoin journey at the time of publication
At the time of publication, bitcoin, the most valuable crypto, was $40,001.61 to IBTC a few weeks after sliding from $50K (its highest in history).