February 25, 2023 | 12:00am
MANILA, Philippines — Crypto assets should not be granted official currency or legal tender status in order to safeguard monetary sovereignty and stability, the International Monetary Fund (IMF) said.
The multilateral lender’s executive board discussed a board paper on “Elements of Effective Policies for Crypto Assets” early this month to provide guidance to member countries on key elements of an appropriate policy response to crypto assets.
The paper identified nine elements to help member countries develop a comprehensive, consistent and coordinated policy response. This includes safeguarding monetary sovereignty and stability, guarding against excessive capital flow volatility, analyzing and disclosing fiscal risks and adopting ambiguous tax treatment of crypto assets, and establishing legal certainty of crypto assets and addressing legal risk.
Other elements are developing and enforcing prudential, conduct and oversight requirements to all actors; establishing a joint monitoring framework across different agencies and authorities; establishing international collaborative arrangements to enhance supervision; monitoring the impact on the stability of international monetary system, and strengthening global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.
The IMF said significant risks have emerged with the growing adoption of crypto assets in some countries, while the supposed potential benefits have yet to materialize.
“These include macroeconomic risks, which encompass risks to the effectiveness of monetary policy, capital flow volatility and fiscal risks,” it said.
The multilateral lender also noted serious concerns about financial stability, financial integrity, legal risks, consumer protection and market integrity.
The IMF directors agreed that crypto assets have implications for policies that lie at the core of the fund’s mandate.
“In particular, the widespread adoption of crypto assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures and exacerbate fiscal risks. Widespread adoption could also have significant implications for the international monetary system in the longer term,” it added.
The IMF, therefore, emphasized that robust macroeconomic policies, including credible institutions and monetary policy frameworks are first-order requirements and that fund advice in these areas remains crucial.
Furthermore, fiscal risks posed by crypto assets including contingent liabilities to the government should be fully disclosed as part of countries’ fiscal risk statement, and the applicability of tax regimes should be clarified.
Likewise, the multilateral lender stressed the need to develop and apply comprehensive regulations, including prudential and conduct regulation to crypto assets, and effective implementation of the Financial Action Task Force (FATF) standards on anti-money laundering/ combating he financing of terrorism (AML/CFT).
It believes that strict bans are not the first-best option, but that targeted restrictions can be applied, depending on domestic policy objectives and where authorities face capacity constraints.
In the Philippines, the Bangko Sentral ng Pilipinas (BSP) has started the conduct of a pilot wholesale central bank digital currency (CBDC).
BSP Governor Felipe Medalla earlier said that the process is a major capacity-building activity for both the BSP and the financial industry.
“We will not go into retail CBDC. We will be in wholesale CBDC which, hopefully, will also facilitate cross-border transfers.” And of course, the dream is for any ASEAN citizen can use their phone to make payments wherever he is in ASEAN,” Medalla said.
Under its Digital Payments Transformation Roadmap, the central bank wants to shift 50 percent of total retail transactions to electronic channels and increase the number of Filipino adults with bank accounts to 70 percent by 2023.