Is the IMF worried about the future of finance?
The International Monetary Fund urging El Salvador to reverse its decision on making Bitcoin legal tender is baffling.
The central American country became the first to make the world’s largest cryptocurrency legal tender back in September last year. Naturally, the situation in El Salvador needs to lot of careful monitoring to ensure the Bitcoin rollout really does benefit the people. Yet the IMF pressing the country to ditch such a pioneering financial policy in an attempt to stop financial instability and dependence on another country’s currency, shows the institution to be on the wrong side of history.
Bitcoin and digital currencies are the future of money. This is inevitable. And this is why an increasing number of institutional investors, household name investors, Wall Street giants and multinational corporations are all sensibly, increasing their crypto exposure, and simultaneously bringing with them their capital, reputational influence and expertise.
They recognise the key traits of Bitcoin and cryptocurrencies are designed for this century. As such, their appeal is growing. Such characteristics include the fact they’re borderless, meaning they are ideally suited to our increasingly globalised world; they’re digital, to match the burgeoning digitalisation of our world; and demographics are on their side as younger generations are more likely to embrace them than older ones. So, for the IMF not to acknowledge this is truly mystifying.
Is the IMF scared of the future of finance? Why would they want to pile more debt on to poorer nations who will unlikely be able to repay using traditional currencies? Perhaps the institution is concerned about the domino effect of BTC adoption that could diminish its global influence?
When El Salvador adopted Bitcoin as legal tender last year, I predicted that three other countries would follow, even as soon as this year. This is because low-income nations suffer because of their weak currencies which are incredibly vulnerable to market changes, sparking soaring inflation.
As such, many rely upon major ‘first-world’ currencies, such as the U.S. dollar, to complete transactions. Yet this brings often very costly problems. A stronger greenback weighs on emerging-market economic prospects, as developing countries have taken on so much dollar-denominated debt in recent decades.
Therefore, by adopting crypto as legal tender these nations have a currency that isn’t influenced by market conditions within their economy of another country’s. Bitcoin operates globally, and is therefore impacted by wider, global economic changes.
Institutions should be working alongside developing economies to help them out of debt and financial instability, using ways that are future-focused. We’ve seen that previous ways haven’t been as effective as predicted. As such, it’s time to look forward. Not back.