Bans On Crypto Aren’t Effective Long-Term Policy Choices

As several countries crack down on the crypto industry, economists at the International Monetary Fund (IMF) are calling for more proactive steps to be taken to handle the risks of crypto.

In a new study, Mauricio Villafuerte, division chief of the IMF’s Western Hemisphere Department, and economists Rina Bhattacharya and Dmitry Vasilyev warn that outright banning crypto could have bad effects.

“While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run.”

The report, which looks at the state of crypto in Latin America and the Caribbean (LAC), says that, despite the possible benefits of the new asset class, crypto is a problem for some countries.

“Crypto asset adoption also presents numerous challenges and risks, particularly for vulnerable LAC countries with a history of macroeconomic instability, low institutional credibility, substantial capital flows, corruption, and extensive informal sectors.”

But economists say that countries shouldn’t ban crypto. Instead, they say, they should come up with a strategy that takes into account what is driving the growing demand for digital assets.

“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 study says that digital currencies issued by central banks are a good choice.