- The Spanish central bank has expressed concern about the "lack of transparency" in the Bitcoin adoption process in El Salvador.
- IMF publishes report detailing the risks of using crypto as legal tender and the dangers of stablecoins.
Spain's central bank expressed its disapproval of the process leading to the adoption of Bitcoin as legal tender by El Salvador in September. This is revealed in a bank report titled " The role of crypto assets as courts legal: the example of El Salvador ”. This report comes as the International Monetary Fund (IMF) has issued a warning against "crypto" and stablecoins.
Rookie mistakes and "lack of transparency
The report of the Bank of Spain was drafted by the General Directorate of Operations, Markets and Payment Systems of the bank, Sergio Gorjon. In it, the bank acknowledged the Central American country's missteps, as one would expect since it is the first country to take this route. They also expressed concern about the lack of transparency that characterized the process. Echoing the sentiments of the co-founder of 'Ethereum Vitalik Buterin, the central bank says forcing Bitcoin on a population with limited knowledge of crypto is risky.
The IMF putson guard against 'crypto' and 'unstable' stablecoins
Meanwhile, the International Currency Fund (IMF) has warned that adopting cryptocurrency as national currency is very risky and "a deprecated shortcut ". In its biannual Global Financial Stability Report , the IMF has expressed concern over the developing world's "crypto".
The report, released on Tuesday, warned that the adoption of A foreign or digital currency by a country could present economic risks. He cited liquidity risks, unstable economies and challenges for central banks in framing monetary policy as a side effect of "crypto". The report did not directly mention El Salvador, which had recently passed a bill making Bitcoin legal tender, but did by the passe warned that the country's decision could have "macroeconomic, financial and legal issues.
Related: JPMorgan: use of Bitcoin by El Salvador for payments could face 'limitation'
The report also highlighted the main "difficult transitions" that the world economy has had to undergo in recent months. These include the coronavirus pandemic, climate change, and the wider adoption of cryptocurrencies. While the IMF has in the past supported innovation to help the developing world, crypto is where they draw the line.
Advising governments, the report recommended that countries put in place policies to eliminate demand for crypto, strengthen monetary policy, maintain central bank independenceand implement "effective legal and regulatory measures to discourage the use of foreign currency". An example of a move to restrict the use of crypto, according to the report, is the introduction of central bank digital currencies (CBDCs). These would reduce the need for crypto, as locals would have the financial tech solutions they are looking for in crypto.
Stables were not left out in the report. The IMF believes that stablecoins like Tether and USDC are also a danger to the global financial system. To mitigate these risks, the report advised that stablecoin issuers be held to the same standards as commercial banks and money market funds. This should bring some "stability" to the poorly regulated multi-billion stablecoins industry.
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