The International Monetary Fund (IMF) has released a report on the growing interest in Central Bank Digital Currencies (CBDCs) while acknowledging that banning cryptocurrencies is not a sustainable solution.
On June 22, the IMF reported on the benefits of CBDCs noting that they could lower remittance costs and improve financial inclusion.
It also stated that crypto needs to be regulated for digital assets to safely remain part of the payment system.
However, in conclusion, the IMF painted a positive picture of the crypto industry saying that outright bans are not effective.
“While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run.”
Banning Crypto Doesn’t Work
The United Nations financial agency, which is working on a global CBDC platform, said that regions should “instead focus on addressing the drivers of crypto demand” rather than banning it.
Demand includes citizens’ unmet digital payment needs and improving transparency by recording crypto asset transactions in national statistics, it added.
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The report focused on CBDC adoption in Latin America and the Caribbean. These regions are “at the forefront of digital money adoption, offering valuable lessons for the rest of the world,” the report noted.
IMF research revealed that four Latin American countries—Brazil, Argentina, Colombia, and Ecuador—ranked among the top 20 in the global adoption of crypto assets last year.
Pro-crypto countries are seeking the benefits that digital assets offer. These include protection against uncertain domestic macroeconomic conditions and circumvention of capital controls.
Furthermore, crypto assets provide improved financial inclusion for unbanked populations, cheaper and faster payments, and stronger competition, according to the IMF.
The IMF acknowledged the risks with crypto and advocated robust regulations for the new asset class. It also highlighted the benefits of CBDCs:
“If well designed, CBDCs can strengthen the usability, resilience, and efficiency of payment systems and increase financial inclusion in LAC.”
The report provides a stark contrast from the outlook in the United States which appears hell-bent on quashing the fledgling industry in its entirety.
Crypto Market Outlook
Crypto markets have ended the week on a high having held on to gains made this week. There has been little change in total capitalization over the past 24 hours which remains at $1.21 trillion.
Bitcoin has failed to hold the $30,000 level, however, dropping one percent in a fall to $29,903 at the time of writing. The asset has gained a remarkable 17% over the past seven days, however. Meanwhile, the rest of the market was also cooling from this week’s epic rally.