Despite expressing caution towards cryptocurrencies, the International Monetary Fund (IMF) has noted that digital assets can be effective alternatives to traditional finance products.
In a blog post published on June 16, the IMF stated that some cryptocurrencies and central bank digital currencies (CBDCs) can be a more effective payment solution than credit and debit cards, especially on energy consumption.
“Depending on the specific details of how they are configured, CBDCs and some kinds of crypto assets can be more energy-efficient than much of the current payment landscape, including credit and debit cards,” the IMF said.
Integrating crypto and card payments
Additionally, the IMF revealed that some central banks are considering having CDBCs available in physical cards; hence there should be a solution to cut energy consumption. The entity stated that integrating cryptocurrencies and CBDCs with physical cards will aid mass adoption.
The IMF acknowledged that although the future of money is still unknown, policymakers considering the adoption of CBDCs and crypto should look at the energy factor comprehensively.
According to the institution, energy consumption will be central to determining the future of money, especially with payment systems embracing distributed ledger technology.
However, the IMF pointed out that proof-of-work (PoW) cryptocurrencies like Bitcoin consume more energy than credit cards and recommended focusing on digital assets with a consensus mechanism or permissioned systems. The body noted that “these advances put crypto’s energy consumption well below that of credit cards.”
IMF’s caution on crypto
Previously, the IMF had maintained that the growth of cryptocurrencies poses a threat to financial stability. The entity has increasingly called for authorities to move fast and enact necessary regulations for the sector.
Consequently, as reported by Finbold, the IMF released guidelines to develop a uniform global crypto regulatory framework. The policies mainly focused on establishing a level playing field for all crypto stakeholders.
Interestingly, IMF chief economist Gita Gopinath opposed the idea of a blanket ban on cryptocurrencies but called for regulation of the sector. Her push to regulate the industry is guided by the need to protect emerging markets.