by Bitcoin’s path to becoming official legal tender in the regions has witnessed many setbacks. Bodies such as the International Monetary Fund (IMF) have clarified their narrative in a recent report. “No” to BTC as legal tender, “yes” to space regulation.
Bitcoin as legal tender has seen many scenarios going both ways. One favored the cause and the other condemned it.
The laws and regulations of individual countries ultimately determine whether Bitcoin can be recognized as legal tender. Some countries, such as El Salvador, have passed legislation recognizing Bitcoin as legal tender. But it has since encountered obstacles in its path from regulators.
Bitcoin adoption in different regions
Legal tender refers to the currency law of a country deeming assets to repay a debt. Although 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 regulations are usually enacted by governments to provide a standard currency for transactions and to regulate the money supply.
Bitcoin operates outside of traditional government and banking systems as a decentralized digital currency. In this way, Bitcoin challenges the idea of legal tender. As the use and acceptance of Bitcoin and other cryptocurrencies continues to grow, countries will 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 country to make bitcoin legal tender.
However, bitcoin’s adoption as legal tender has raised several questions from various regulators, including the International Monetary Fund (IMF) last year.
The growing debate over the use of Bitcoin
Echoing the same position, the IMF released a document on February 23 highlighting various reasons for not accepting cryptocurrencies such as BTC as legal tender. The report “Elements of effective rules for crypto assets” developed a framework of nine policy principles that addressed macro-financial, legal and regulatory issues and international coordination.
Later added:
“By adopting the framework, policy makers can better mitigate the risks posed by crypto assets while exploiting the potential benefits of technological innovation.”
Obvious reasons not to choose Bitcoin
Overall, Bitcoin has several pitfalls in the race to become legal tender. First, Bitcoin’s price volatility can make it difficult to use it as a reliable medium of exchange. Its value can fluctuate rapidly in the short term, creating significant uncertainty for users and sellers.
Second, the lack of a central authority to control the issuance and circulation of Bitcoin may make it vulnerable to abuses such as money laundering, terrorist financing, and other illegal activities. This could undermine the integrity of the financial system and pose a threat to global financial stability.
Conversely, according to research firm Messari, fiat currencies are used for money laundering 800 times more often than cryptocurrencies.
Third, Bitcoin’s limited adoption as legal tender means it may not be widely accepted for transactions, leading to challenges in its use as a medium of exchange. Nevertheless, the crypto community agrees with the IMF crypto narratives. For example, one user tweeted:
Another colleague presented a point of view that shed light on the countries adopting BTC regardless of the criticism.
Meanwhile, Twitter user and Bitcoiner Carl B Menger expressed fortunate that countries are independent of the IMF and can “do anything for their citizens”.
In an interview with BeInCrypto, Dmitry Ivanov, CMO of the CoinsPaid cryptocurrency payment ecosystem, took a relatively neutral approach to describing the situation.
Pros and cons to consider
In an email conversation, Ivanov said that IMF-recommended regulators recently imposed significant restrictions on digital currencies to protect monetary sovereignty. The monetary fund has also advised countries to prevent crypto from being granted legal tender status, which appears to be a growing trend at the moment.
“This position goes against the principles of financial freedom and negates the whole concept of decentralization that digital currencies like Bitcoin seek to institutionalize.”
The IMF’s goal is clear: to centralize cryptos and control them like the US dollar. This will help create a tax framework, eliminating legal risks, supervision and monitoring of crypto market participants. “While this may raise the barrier to entry, it is beneficial when viewed holistically as it clears the market of fraudsters and increases investor protection.”
“While Bitcoin’s volatility remains its biggest drawback, we can agree that the cryptocurrency has matured to go mainstream,” he concluded.
Are cryptocurrencies off the table?
The simple answer is no, and the representatives of the IMF are on the same side. But the sector needs work or regulatory measures to remove the bad actors. IMF managing director Kristalina Georgieva in an interview with Bloomberg preferred to regulate cryptocurrencies.
However, after commenting, Georgieva made another statement indicating that while the IMF may be interested in digital assets, they can strictly adhere to the rules. Georgieva noted: “If regulation comes slowly and crypto assets become more risk for consumers and potential for financial stability, the option of banning them (cryptocurrencies) should not be removed from the table.”
Overall, regulators are indeed 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 present documents and recommendations that set the standard for the global regulatory framework for cryptocurrencies.
Only time will tell if these (regulatory) measures will help the cryptocurrency sector.
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