The International Monetary Fund has recommended for increased regulation of the cryptocurrency trade, citing the widespread use of digital assets in nations deemed corrupt or with severe financial restrictions.
Cryptocurrency, among other things, enables citizens to undermine government power by evading trade restrictions set by the government.
Additionally, it encourages illicit activity by assisting criminals in avoiding investigation. By eliminating middlemen, cryptocurrency has the ability to wreak havoc on the existing financial infrastructure and undermine it.
Fighting Crypto Corruption
The IMF analysis demonstrates why countries may choose to compel intermediaries, such as digital currency exchanges, to undertake know-your-customer (KYC) processes – identity verification rules intended to combat fraud, money laundering, and terrorism financing.
Certain countries, such as the United States, have already implemented similar measures.
With the global cryptocurrency industry expected to exceed $4 trillion by 2026, numerous countries are moving quickly to regulate it.
With the rise of Bitcoin and ether creating a frenzy among investors, new schemes are being developed to perpetrate various forms of corruption and Ponzi schemes.
Suggested Reading | Girl, 13, Becomes A Multimillionaire By Selling NFT Art Of Long-Necked Women
Crypto total market cap at $1.948 trillion on the weekend chart | Source: TradingView.com
Moving Dirty Money Digitally
According to the IMF, digital assets could be used to shift illicit funds or circumvent capital prohibitions. However, the group made no specific mention of any countries.
A recent IMF research disclosed that crypto assets may be used to transfer “corruption proceeds or avoid capital controls” in 55 nations.
Participants in the poll, which included between 2,000 and 12,000 respondents from each country, were questioned whether they used or held digital assets in 2020, reflecting a recent study in which the organization urged for more consistent digital currency governance across international boundaries.
The IMF stated that it derived its baseline data on bitcoin usage from information gathered in a study performed by Statista of Germany.
Regulating Instead Of Fighting
“The best strategy is not to fight but to figure out how to effectively regulate bitcoin,” the IMF research said.
“Residents of nations with a well-developed traditional banking sector may be less inclined to feel the need for cryptocurrency,” the researchers conclude.
The authors discovered numerous reasons why one country’s virtual currency may be more popular than another’s.
Due to high inflation, a popular cryptocurrency such as bitcoin may be more stable than a native currency.
And because of the fact that poorer countries typically have tighter capital controls — measures that restrict the movement of foreign funds into and out of the country’s economy — cryptocurrency can also be used to avoid taxes and restrictions.
The IMF indicated that its findings are noteworthy, but should be interpreted cautiously as a result of the limited sample size and unclear accuracy of the data.
Featured image from 1stNews, chart from TradingView.com