Crypto assets can't be a legal tender; ban on crypto-linked activities difficult: IMF-FSB paper

In its synthesis paper IMF and Financial Stability Board (FSB) has said that crypto assets should not be granted official currency or legal tender status. However, the report has also said that a blanket ban on the activities linked to crypto assets could be costly and technically demanding to enforce.

The paper has argued that giving legal status to crypto could expose government revenues to exchange rate risk.

Also Read: G20 Summit: Talks on cryptocurrencies, multilateral development banks reforms on agenda

The synthesis paper is expected to be taken for further discussions in the upcoming G20 Summit. The paper has also urged centrak banks to avoid holding crypto assets in their official reserve as they pose a risk to monetary and global financial stability.

IMF-FSB has said that though banning crypto assets is not easy, temporary restrictions should not substitute for robust macroeconomic policies. "Developing effective frameworks and policies is the best way to limit substitution into crypto assets," the report said.

The report has also suggested countries to guard against excessive capital flow volatility by taking steps such as clarifying the legal status of crypto assets. It also mentioned that emerging markets may face amplified macro-financial risks from crypto assets due to a less developed tax framework, large unbanked population, and larger cross-border transaction costs.