This is the last article of a series of three dedicated to a report issued by the International Monetary Fund (IMF) issued in which the advantages and disadvantages of the use of crypto assets as legal tender within a country are analyzed, before continuing reading I recommend you read the first and second part of this series.
Previously we analyzed some of the points argued by Tobías Adrián and Rhoda Weeks-Brown, advisers and directors of the IMF, about the adoption of cryptocurrencies as legal tender, among the points analyzed referring to the incidence of this type of measures, we have the following factors: necessary investment, macroeconomic financial stability, financial integrity and protection of the user or the environment.
In this last installment, we will see some of the elements a little "less technical" that in the opinion of the IMF make the use of cryptos as legal currencies unfeasible. Before we start by citing one of the parts of the aforementioned report:
"Some countries may be tempted by a shortcut: adopt crypto assets as national currencies. Many are safe, easy to access, and cheap to transact. However, we believe that, in most cases, the risks and costs outweigh the possible benefits "
I like cryptocurrencies, only if I can control them
It is not the first time that I read that a government or state entity recognizes the benefits of the blockchain system, they speak of its benefits in terms of speed, simplification of processes, savings in commissions, security regarding the protection of information, in short, from From the purely computing point of view, it seems to them a quite valuable tool, but… potentially very dangerous, the reason: its decentralization.
It must be understood that governments and public entities are a legal fiction, which arises from the need for societies to have a body of power that regulates and controls relations between citizens. Within these control, elements are monetary policy, which is fairly simple terms is nothing more than the government's strategy to control changes in the exchange value of its currency.
And it is evident that being governed by Smart Contracts and by market movements (law of supply and demand), cryptos represent for many governments an element that undermines their authority and power over society, that is why it is not surprising that while The more totalitarian a government is, the more aversion or need for control over cryptos it will want to have.
Too volatile to be true
One of the stigmas that weigh the most in the cryptographic world is the constant fluctuation of the value of cryptocurrencies, this generates, for obvious reasons, the suspicion of many people and it is no wonder, no one wants to have a value reserve that is constantly rising and going down, for this the blockchain already has two solutions: stable coins (click here to learn about them) and the generalization of the adoption of cryptocurrencies.
We must understand that in essence the cryptocurrencies that are created in each project, with a few exceptions, are designed to maintain stable and reasonable prices, it is the market and investors that begin to operate with them in a speculative way making their value is inflated or deflated as it suits them, now, this happens because there are many crypto assets in few hands (which creates a species of monopolies) or because tokens are given more importance than to the projects that generate them, both things can be solved with the generalization in the use of blockchain projects.
Little incentive for adoption
The last of the reasons put forward by IMF analysts about the infeasibility of the application of cryptos as currencies for legal use refers to (textual quote): “it is unlikely that crypto assets will become fashionable in countries with inflation and interest rates. stable exchange rates and credible institutions "as" households and businesses would have little incentive to price or save on crypto-assets... "
In short, the friends of the IMF tell us that if a country has a strong economy, with little or no inflation and credible institutions it would not be attractive for people to adopt cryptocurrencies as a legal currency, then I wonder what if If not? Would it be a good idea to implement them? Because that is not what they have been selling ...
All this comes to mind due to the decision of the government of El Salvador to adopt bitcoin as a currency for legal use, it is a rather risky bet currently, but someone has to take the first step. Did you know that the other legal tender in the Central American country is the American dollar? We could then understand that your government, among other things, seeks to become independent from the monetary policy imposed by the United States on dollar holders, don't you think Is that a step towards financial independence? What do you think would happen if the case of El Salvador ends up being successful? How would it affect the predominant global financial system?
I would like that based on the questions in the previous paragraph we reflect a little and form our criteria regarding the advantages and disadvantages raised by the IMF, do you think that the example of El Salvador will end up being one of failure or one of success? Would you agree if your country adopted the same measure? How would you feel about using cryptocurrencies as a legal means of payment? I hope to read your opinion in the comments box.
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