Around the world in recent weeks, tensions have mounted over the future of money. Developing and developed countries have pursued new initiatives to move toward a digital currency.
However, officials from the U.S., IMF, World Bank and the Bank for International Settlements argue that by adopting cryptocurrencies, countries risk facilitating money laundering and undermining capital controls while exposing their citizens to severe price volatility.
Critics, advocates and investors in cryptocurrency have come out on various platforms to question and condemn the standpoint taken by the world’s leading financial institutions arguing that these agencies only want to maintain the status quo that is beneficial to them.
In Argentina for example, when the Central Bank issued a de facto ban on trading digital assets, the South American nation had just recently negotiated a bailout with the IMF that had a promise of a crackdown on crypto as part of the deal. Crypto investors were deeply enraged by this.
The question is whether the issuance and flow of money will be dominated by developed-world Central Financial Institutions or by rules being shaped by the new and expanding blockchain technology invented about 13 years ago.
The Deputy Director of the IMF’s Monetary and Capital Markets Department, Dong He, is of the view that said the risk of a sudden drop in the price of Bitcoin makes it unsuitable as a national currency. Indeed, Bitcoin has lost more than half its value since November.
Dong He spoke on the possibility of adopting Bitcoin saying, “What would happen to the tax revenue? What would happen to your obligations to spend on social services?”
Dong He reportedly declined to speak on the anti-crypto provisions in Argentina’s letter to the fund adding, “This is a very risky proposition.”
Crypto supporters however insist that cryptocurrencies provide an escape from rapidly inflating currencies in places like Argentina and Nigeria.
Crypto enthusiasts also argue that cryptocurrencies like Bitcoin allow poor countries to explore alternatives to the existing global financial framework that appears to be designed to benefit rich countries.
They argue that the reservations of the world’s monetary stewards have less to do with protecting the well-being of developing-world citizens and more to do with preserving a system in which rich-country central banks and governments dominate the global monetary system.
“Bitcoin stands against everything the IMF stands for.”
Alex Gladstein, Chieftrategy Officer of the Human Rights Foundation, an NGO that supports Bitcoin adoption.
“It’s an outside money that’s beyond the control of these alphabet soup organizations,” Gladstein added.
These words have some truth in light of what is happening in the first country to adopt Bitcoin as a currency, El Salvador. The country’s popular and autocratic leader, Nayib Bukele has continued to use the Bitcoin project as a symbol of his defiance of international institutions.
The IMF has expressed concerns over the adoption of BItcoin in El Salvador and in November the U.S. put relations with the nation “on pause”. Despite this and more backlash, Bukele and his investors have pushed on with more investments into Bitcoin developments.
In April, a Canadian entrepreneur called Samson Mow announced that he had raised $21 million to fund a new company involved in El Salvador’s Bitcoin experiment. Around the same time, tides were turning for the small country known as the Central African Republic.
The Central African Republic became the second country to adopt Bitcoin as legal tender much to the dismay of the IMF, World Bank and the region’s central bank known as the Bank of Central African States.
CAR has ploughed ahead with its initiative, announcing plans to build the Sango “Crypto Island” to attract international investment. Ranked as one of the world’s poorest countries, it is no surprise that the nation would look to alternative systems to try and lift its citizens out of poverty.
However, due to the existing poverty conditions, it remains to be seen how the country will effectively implement the Bitcoin changes.
As more than 100 countries are currently exploring centralized digital currencies, it appears that it is not so much the message of digitization that is being opposed but rather the messenger as being decentralized and out of the control of existing organizations whose actions seem to be in fear of becoming obsolete.