Cryptocurrency and the International Monetary Fund

Abstract

In this study, we have focused on the IMF's role in regulating cryptocurrency to maintain the stability of the global financial system. We began by understanding the fundamentals of blockchain and cryptocurrency to understand the difference between the two. The IMF has supported blockchain and DLT as a technology but is very cautious about cryptocurrency as a use case. Since cryptocurrencies are not backed by any central bank and the prices are extremely volatile due to inelastic supply, it doesn't fulfill the criteria of money as a store of value. Even though IMF has strongly suggested global regulations for crypto trading, they were not able to actively prevent the country of El Salvador from recognizing bitcoin as legal tender. The world is watching El Salvador as an experiment, and in the future, IMF must come forward to convene the global economies to have a set of global standards around crypto and foster a healthy competition between central backed digital currency and privately owned digital currency. IMF will play a significant role in designing the digital currency policy based on the objective of a particular economy since the "one-size-fits-all" model will not work here.