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Governments should ensure they have the power to impose capital controls on crypto alongside traditional assets, the International Monetary Fund has said, as the war in Ukraine continues to raise concerns about circumventing penalties.
This means that citizens of crisis-hit countries like Greece and Argentina could potentially see their access to bitcoin restricted alongside restrictions on withdrawing cash from ATMs or accessing foreign currency.
“Laws and regulations relating to foreign exchange and capital flow management measures should be reviewed and amended as necessary to cover crypto assets,” even though currencies like bitcoin are not officially considered financial assets or currencies foreign affairs, the IMF said in a statement. financial stability report published on Tuesday.
“The war in Ukraine has brought to the fore some of the challenges that regulators face in terms of applying sanctions and capital flow management measures,” he added, citing the risk that evasion based on cryptography becomes “more widespread”.
Although the IMF admits that it is “not practical” to make large transfers of rubles on crypto exchanges, it warns that some of those seeking to evade sanctions could turn to less scrupulous providers or use others privacy techniques like mixers.
Crypto mining also offers an opportunity for emerging market countries to efficiently exchange energy for bitcoin, the IMF said, adding to concerns that states’ ability to stop capital outflows during financial turmoil could be compromised.
In remarks to reporters after the report was released, IMF officials admitted that virtual assets are unlikely to be used to circumvent financial restrictions imposed on Russia.
“The evidence to date suggests that not much is happening in terms of sanctions undermining via crypto assets,” said Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, citing data on Tether stablecoin transaction prices and volumes. “Of course, that’s something we’re watching very, very closely.”
The report follows an IMF warning in October that under-regulated crypto could cause instability and fraud. Central bankers such as European Central Bank President Christine Lagarde have previously said crypto is being used to escape financial penalties imposed on Russia, despite little evidence.
UPDATE (April 19, 2022, 15:23 UTC): Add comments from IMF’s Tobias Adrian in penultimate paragraph.