Cryptocurrency more popular in corrupt countries

  • International Monetary Fund published the report “Cryptocurrency, Corruption and Capital Controls: Correlations Between Countries” showing the different case use of crypto.
  • According to the report, IMF believes that oversight of digital assets is too weak in countries with total financial controls.

Cryptocurrencies are becoming more popular in countries that are considered corrupt or have strict controls on the movement of money, according to the International Monetary Fund.

The IMF published the report “Cryptocurrency, Corruption and Capital Controls: Correlations Between Countries,” which states that people in countries with higher levels of corruption and strict financial regulation are more likely to use cryptocurrencies:

We found that the use of crypto assets is significantly associated with higher levels of corruption and stricter capital controls.

IMF experts surveyed 110,000 residents in 55 countries. The authors of the report list the factors that explain why Bitcoin may be more popular in one country than in another. In countries with higher inflation rates, a popular cryptocurrency such as Bitcoin may be more stable than the local currency in terms of value now and in the long term. Since poorer countries tend to use stricter capital control processes, prohibiting foreign funds from participating in the country’s economy, cryptocurrency can be a useful tool for tax evasion and other government restrictions.

The pseudo-anonymity of crypto-assets (where only digital identification is required for transactions) makes them a potential vehicle for creating illicit financial flows, including proceeds of corruption,

The authors of the report emphasize that in such countries, stricter international regulation of cryptocurrencies is needed, in particular, the rule “Know Your Client” (KYC), that is, the requirement of identification of cryptocurrency clients. The International Monetary Fund is not particularly loyal to cryptocurrencies.

Also Read: IMF sends mixed signals on Bitcoin – makes the case against adoption, but says they can promote financial inclusion

Almost all of the statements by the fund’s experts are aimed at tightening the regulation of cryptocurrencies in developing countries. Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, said in January that the volatility of cryptocurrencies could create “immediate and serious risks” in developing countries.

The report explains why countries may require intermediaries such as cryptocurrency exchanges to implement “know your customer” procedures – identity verification standards that are designed to prevent fraud, money laundering, or terrorist financing.

Bloomberg reports that nations around the world are fighting for a better way to regulate the $2 trillion cryptocurrency market, with the level of oversight varying widely from country to country.

An International Monetary Fund study found that crypto-assets “can be used to transfer proceeds of corruption or circumvent capital controls,” the organization said, without singling out individual countries.

The IMF said it took basic data on the use of cryptocurrencies from information gathered in a survey conducted by German company Statista.

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