Yesterday, the IMF Executive Board published a document on crypto assets with policy recommendations. Beyond the suggestions, the IMF said that a complete ban on cryptocurrencies should not be the best option. However, ‘some’ directors believe that a cryptocurrency ban should be on the table. Countering this view is the desire to foster innovation and use blockchain for public policy goals.

The key recommendations are divided into three themes: macroeconomic, legal and regulatory, and international coordination.

On the macroeconomic front, since the IMF’s key role is to foster international financial stability, it wants to make sure that individual economies remain stable. For some countries with less robust local currencies, there is a real risk that citizens will choose to hold assets in dollar-dominated blockchain-based stablecoins instead of the local currency. Therefore, there is a potential risk of monetary sovereignty.

The IMF suggests combating sovereignty risk by avoiding large fiscal deficits and avoiding making a cryptocurrency legal tender (like El Salvador).

Often those same countries have some restrictions on money moving out of the country, and cryptocurrencies can undermine them. A second macroeconomic recommendation is to hedge against this risk by ensuring that capital movement restrictions apply to crypto assets. It also suggests that these countries should maintain a higher level of foreign exchange reserves to address volatility in cross-border movements.

The third internal economic impact is in the tax base, which is why the IMF suggests adopting a clear fiscal policy for crypto assets.

The document also reviews a variety of benefits that cryptocurrencies enable, such as low-cost cross-border payments and the associated risks. As for payments, he questions some of the benefits when crypto-to-cash conversion costs are included. He is skeptical of the overall benefits.

“While the purported potential benefits of crypto assets have not yet materialized, significant risks have emerged,” the document says.

The timing of the document is opportune given this week’s G20 summit, where crypto assets are a high-profile topic.

Meanwhile, the IMF recently published its own paper inspired by cryptocurrencies to reduce the costs of cross-border payments. It proposes XC, a global centralized ledger that uses smart contracts for cross-border payments involving central banks, banks, and payment providers.