Factbox: IMF urges El Salvador to ditch bitcoin, other countries crack down

Jan. 26 (Thomson Reuters Foundation) – The International Monetary Fund (IMF) has urged El Salvador to drop bitcoin as legal tender, citing risks to the country’s financial stability and consumer protection, joining a growing chorus of countries cracking down on private digital currencies.

The Central American nation became the first in the world to adopt bitcoin as legal tender in September alongside the US dollar, with authorities saying it will help save residents’ remittance fees and boost financial inclusion .

But adoption was rockywith only a fraction of businesses accepting bitcoin payments, and technical issues affecting the government’s cryptocurrency enforcement.

There are “significant risks associated with the use of bitcoin for financial stability, financial integrity, and consumer protection, as well as associated contingent tax liabilities,” the IMF said in a statement. declaration on El Salvador on Tuesday.

He urged authorities to “reduce the scope of bitcoin law by removing bitcoin’s legal tender status.”

Proponents of cryptocurrencies – especially in developing countries – say they are an effective way hedge against hyperinflation and uncertainty.

But the crypto market is increasingly dominated by large investors, and authorities fear that highly volatile digital currencies will undermine their control over the financial and monetary systems, increase systemic risk, foster financial crime and harm businesses. small investors.

Here is an overview of countries that have recently regulated – or are considering regulating – cryptocurrencies.

RUSSIA

Russia’s central bank proposed last week to ban the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, the well-being of citizens and its sovereignty over monetary policy. , as well as high energy consumption.

Russia – the world’s third-largest bitcoin mining company – has fought against cryptocurrencies for years, saying they can be used to launder money or finance terrorism. It gave them legal status in 2020, but banned their use as payment.

INDONESIA

The Indonesian Financial Services Authority (OJK) said this week that financial firms are not allowed to offer and facilitate the sale of crypto assets in the country where cryptocurrencies cannot legally be used for payment. .

Last year, the Ulema Council of Indonesia (MUI), a prominent religious group, compared the trading of cryptocurrencies to gambling and said that using them as payment is illegal in Islam because they have elements of uncertainty and prejudice.

INDIA

The Indian government has said it is seeking to ban most private cryptocurrencies in a new bill that would only allow certain cryptos to promote the underlying technology and its uses.

The central bank has also expressed “serious concerns” about cryptocurrencies and is set to launch its digital currency.

Prime Minister Narendra Modi said it was important for democratic nations to cooperate in the regulation of cryptocurrencies so that they do not fall into “the wrong hands” and corrupt the youth.

PAKISTAN

Earlier this month, Pakistan’s central bank recommended banning cryptocurrencies, arguing that allowing them to be traded would lead to capital flight.

“After careful analysis of the risks and benefits, it emerged that the risks of cryptocurrency far outweigh its benefits for Pakistan,” it said in a report.

SINGAPORE

The Monetary Authority of Singapore last week banned all advertisements of crypto assets, including advertisements via social media influencers. Companies can only market them on their own websites and social media platforms.

While the central bank “strongly encourages” the development of blockchain technology and innovative crypto token applications, cryptocurrency trading is “highly risky and not suitable for the general public,” MAS said in a statement.

Service providers should not present cryptocurrency trading in a way that “trivializes the high risks” of their trading, he said.

SPAIN

Also last week, Spain regulated the advertising of crypto assets, including by social media influencers, and requires all advertising to include warnings about the risks involved.

AUSTRALIA

Australia said last month it would create a licensing framework for cryptocurrency exchanges and consider launching a retail central bank digital currency.

The government will begin consultations this year on establishing a licensing framework for digital exchanges, allowing consumers to buy and sell crypto assets in a regulated environment, authorities said.

CHINA

Regulators in China stepped up crackdown on cryptocurrencies with cover to forbid on all crypto transactions and mining in September, after banning financial institutions and payment companies from providing services related to crypto transactions in May, as well as in 2013 and 2017.

China sees cryptocurrencies as a threat to its sovereign digital yuan, which is in an advanced pilot stage.

Prior to the ban, China accounted for more than half of the world’s crypto supply, and miners have since moved elsewhere.

TURKEY

Last year, Turkey’s central bank banned the use of crypto assets in payments, saying they carry significant risks due to volatility in market values, irrevocable transactions and the fact that they are used in illegal activities.

NIGERIA

Nigeria’s central bank banned local banks from trading or facilitating cryptocurrency transactions last year, tightening restrictions in place since 2017.

The ban pushed the industry underground, with Nigerians trading with each other using mobile messaging apps and platforms such as Binance and Paxful. This opened them up to scams and the risk of arrest.

Reporting by Rina Chandran in Bangkok @rinachandran; Editing by Zoé Tabary. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which spans the lives of people around the world struggling to live freely or fairly. Visit http://news.trust.org

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