Bitcoin’s path to becoming an official legal tender in the regions has seen multiple setbacks. Organizations such as the International Monetary Fund (IMF) clarified their narrative in the latest report. ‘No’ to BTC as legal tender, ‘Yes’ to regulating space.
Bitcoin as legal tender has seen multiple scenarios facing both directions. One favored the cause and the other disapproved of it.
The laws and regulations of each country ultimately determine the ability of Bitcoin to be recognized as legal tender. Some countries, such as El Salvador, have passed laws that recognize Bitcoin as legal tender. But since then it has encountered obstacles in its path from regulators.
Bitcoin adoption in all regions
Legal tender refers to the monetary law of a country that recognizes an asset to pay off a debt. While Bitcoin is not currently accepted as legal tender, it can be used as a medium of exchange for goods and services in some countries.
For example, Bitcoin is considered property for tax purposes and not legal tender in the United States. However, it can be used to purchase goods and services.
It is worth noting that legal tender laws are generally enacted by governments to provide a standard currency for transactions and to regulate the money supply.
Bitcoin operates outside of traditional banking and government systems as a decentralized digital currency. By doing so, Bitcoin challenges the idea of legal tender. As the use and acceptance of Bitcoin and other cryptocurrencies grow, countries recognize them as legal tender.
El Salvador was an early adopter and one of the first to accept Bitcoin as legal tender. Similarly, the Central African Republic became the first African nation to make Bitcoin legal tender.
However, the adoption of Bitcoin as legal tender raised several questions from different regulatory authorities, including the International Monetary Fund (IMF) last year.
Growing debate on the use of Bitcoin
Reiterating the same stance, the IMF on Feb. 23 released a document outlining different reasons for not accepting cryptocurrencies like BTC as legal tender.
The “Elements of Effective Policy for Crypto Assets” report developed a framework of nine policy principles that addressed macro-financial, legal and regulatory issues, and international coordination. Later he added:
“By adopting the framework, policymakers can better mitigate the risks posed by crypto assets while also reaping the potential benefits of technological innovation associated with them.”
Obvious reasons not to choose Bitcoin
Generally speaking, Bitcoin has some pitfalls in the race to become legal tender. First, the volatility of Bitcoin’s price can make it difficult to use as a reliable medium of exchange.
Its value can fluctuate wildly over a short period, creating great uncertainty for users and traders.
Second, the lack of a central authority to control the issuance and circulation of Bitcoin can make it vulnerable to abuse, such as money laundering, terrorist financing, and other illegal activities. This could undermine the integrity of the financial system and pose risks to global financial stability.
By contrast, according to analytics firm Messari, fiat currency is used for money laundering 800 times more than cryptocurrencies.
Third, Bitcoin’s limited adoption as a legal tender means it may not be widely accepted in transactions, creating challenges in its use as a medium of exchange. However, the crypto community agrees with the IMF’s crypto narratives. For example, one user tweeted:
Another fellow narrated a point of view that shed light on countries adopting BTC regardless of censorship.
Meanwhile, Twitter user and Bitcoiner Carl B Menger expressed his happiness that countries are independent of the IMF and can “do the best they can for their citizens.”
Speaking with BeInCrypto, Dmitry Ivanov, CMO of the CoinsPaid crypto payment ecosystem, took a relatively neutral approach to describing the situation.
Pros and cons to consider
In an email conversation, Ivanov said that the IMF recently recommended that regulators place a significant restriction on digital currencies to safeguard monetary sovereignty.
The monetary fund has also advised countries to avoid granting legal tender cryptocurrency status in what appears to be a growing trend today.
“This position is against the principles of financial freedom and negates the whole concept of decentralization that digital currencies like Bitcoin seek to institutionalize.”
The goal of the IMF is clear: to centralize cryptocurrencies and control them like the US dollar. Doing this will help create a framework for taxation, de-risking, supervision and monitoring of crypto market participants.
“While this may raise the threshold for entry, it is advantageous when viewed holistically as it cleanses the market of scammers and increases investor protection. While Bitcoin’s volatility remains its biggest drawback, we can agree that the cryptocurrency has come of age to become mainstream.”
Are cryptocurrencies off the table?
The simple answer is no, and the IMF representatives are on the same page. But the sector needs work or regulatory measures to weed out the bad actors. IMF Managing Director Kristalina Georgieva, in an interview with Bloomberg, preferred to regulate cryptocurrencies.
However, after commenting, Georgieva made another statement stating that while the IMF may be interested in digital assets, it can be stickler for rules. Georgieva noted:
“If regulation is slow to arrive and crypto assets become a greater risk for consumers and a potential for financial stability, the option to ban them (cryptocurrencies) should not be ruled out.”
In general, regulatory bodies are taking steps to regulate the decentralized space. The Financial Stability Board (FSB), the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) will deliver documents and recommendations that will set standards for a global crypto regulatory framework.
Only time will tell if these (regulatory) measures will help the cryptocurrency sector.
