Is crypto the haven of corrupt countries? IMF says so

Sahana Kiran
Source – Unsplash

Crypto has managed to fend off an array of associations. From the dark web to money laundering, cryptocurrencies were viewed as assets that were mere instruments that carry out illicit activities. Thanks to digitalization, the interest in crypto recorded a massive surge. While countries across the globe have been openly embracing Bitcoin, the International Monetary Fund [IMF] isn’t pleased with all.

A recent report displayed the agency’s dismay towards the crypto market. A report curated by the IMF titled ‘Crypto, Corruption, and Capital Controls: Cross-Country Correlations’ began surfacing on Twitter. The document highlights the correlations between crypto and corrupt nations. Summarizing the entire report, the IMF said

Corruption has existed since time immemorial. Whereas, the first cryptocurrency made its debut only in 2009. But why is crypto the villain, you ask? ‘Pseudonymity’, the IMF highlights. The IMF believes that the pseudonymity of these assets allows them to streamline the process of carrying out illicit activities.

Not to sound too biased, the IMF brought in cash as well. The report read,

“….cash provides full anonymity and large denomination bills have long been considered an aid for crime and tax evasion, crypto-assets in their current form make it possible to move even larger amounts speedily and with greater ease, including across national borders.”

So what about fiat? Does it get a free pass? To this day, despite the existence of pseudonymity-filled cryptocurrencies, fiat is widely used for laundering money. Pakistan’s potential Prime Minister’s son is currently facing heat following his money laundering case. That’s not it. Here’s another one, “Pakistan probe links Iranian Supreme Leader’s representative to money laundering.” This list will go on and on.

So what is IMF’s solution?

After diligently correlating crypto with corruption throughout the report, IMF came up with a conclusion. Here’s what the report concluded with,

“Overall, our interpretation, combined with a principle of prudence given the rapid increase in macroeconomic relevance of crypto assets, is that this evidence adds to the case for regulating crypto usage—for example, by requiring intermediaries to implement know-your-customer procedures.”

Regulations surrounding crypto have become stringent over the years. As a result, almost every consumer and exchange across the globe are required to abide by KYC norms.

Our take on the report

The IMF seems to have cherry-picked this angle and prolonged its vengeance against crypto. As a vital agency, the IMF could have aided countries or exchanges in regulating the market keeping in mind consumer protection. The growth of the industry is inevitable. With almost every other mainstream firm embracing Bitcoin, governments have to be well prepared. IMF, however, seems to be openly discouraging this move.

El Salvador for instance went on to embrace Bitcoin and had to face the wrath of the IMF. The country witnessed remarkable progress and garnering remittances was eased.

A country like India, on the other hand, is home to a slew of crypto businesses. However, the government went on to impose a hefty tax on the profits acquired by these assets. All of this, without legalizing it. This could certainly strain the growth of crypto in the country.

Adhering to the inevitable wave of crypto, IMF should rather concentrate on rolling out regulations as opposed to forcing individuals to work around it.