The International Monetary Fund has made a surprise U-turn on its stance on the cryptocurrency ban as the US and other major economies continue their crackdown.
The IMF’s sudden flip on the crypto ban, warning it “may not be effective” comes just months after suggesting banning as an option, because it would also prevent countries from gaining the associated benefits.
“While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run,” the IMF said in a website post about interest in central bank digital currency (CBDC) adoption in Latin America and the Caribbean. “The region should instead focus on addressing the drivers of crypto demand, including citizens’ unmet digital payment needs, and on improving transparency, by recording crypto asset transactions in national statistics.”
The Washington-based Fund said earlier this year that outright crypto bans “should not be ruled out,” and called for a “coordinated response” to the rise of crypto that it warned could undermine the global monetary system.
The IMF’s softening stance toward crypto comes as the US embarks on the crypto crackdown in the wake of 2022’s market downturn that wiped away $2.0 trillion of value and culminated with the implosion of major exchange FTX.
China cracked down hard on bitcoin, Ethereum and other cryptocurrencies in 2021, expelling bitcoin and crypto miners from the country and briefly crashing the market before crypto companies established themselves in the US and around the world.
The IMF has clashed with El Salvador since the country gave bitcoin legal tender status in 2021, warning of “underlying risks to financial integrity and stability, fiscal sustainability, and consumer protection.”
The bitcoin price has almost doubled this year as traders abandon smaller cryptocurrencies in favor of bitcoin and its nearest rival Ethereum following a US crackdown that some think is part of a plot to destroy the market.
In their report, the IMF economists leaned into a position closer to adopting cryptocurrencies, but within a well-regulated framework. They said that cryptocurrency offered a number of benefits to its adopters. They wrote that crypto offered protection against macroeconomic uncertainty, promoted financial inclusion, and faster payments among other benefits.
In a survey shared with officials across the region, the IMF found that half of the respondents said they were considering both retail and institutional CBDC options. What they also saw in CBDCs was a way to promote resilience in communities vulnerable to natural disasters, and create a way to boost financial inclusions in more remote ones.
The price of bitcoin surged to over $31,400 recently, reaching its highest level since 2022, fuelled by growing institutional interest in the maiden cryptocurrency. Although bitcoin briefly retracted, it has managed to maintain a trading value above $30,000 for the first time since April. This price level has proven to be a significant resistance point throughout 2023.
Economist and trader Alex Krüger said he is bullish on it, setting a high price target, particularly in light of the recent spot Bitcoin exchange-traded fund applications.
According to Krüger, the news of the world’s largest asset manager, BlackRock filing for a spot Bitcoin ETF was “huge and not properly priced in yet”.
Analysts said the recent rally faces uncertainties regarding the sustainability of its gains after having risen by over 85 per cent in value this year. The overall market grapples with regulatory concerns and macroeconomic factors contributing to the prevailing uncertainty.
Crypto trading expert and analyst Michaël van de Poppe, expressing doubts about the cryptocurrencies’ ability to sustain their rally, noted that if bitcoin experiences a minor correction to around $28,500, it will present an ideal opportunity to accumulate the asset.
The current surge in bitcoin’s value can largely be attributed to the increasing interest from major financial institutions. Notably, BlackRock, the world’s largest investment management company, recently applied to register a bitcoin spot exchange-traded fund (ETF).
Furthermore, the launch of a digital asset trading platform by EDX Markets, a cryptocurrency exchange supported by renowned firms such as Charles Schwab, Fidelity Digital Assets, and Citadel, has also instilled investor confidence in the crypto space, especially at a time when the Securities Exchange Commission (SEC) has intensified its regulatory crackdown on crypto exchanges like Binance and Coinbase over the alleged listing of unregistered securities.
In terms of Bitcoin’s price analysis, as of now, it is comfortably trading above the resistance level of $30,000, with a valuation of $30,621. On the weekly chart, bitcoin has experienced a growth of over 15 per cent.
Despite its substantial growth this year, bitcoin still trails behind its previous record high of over $60,000, achieved in 2021.