The International Monetary Fund (IMF) has laid out an action plan for how countries should handle cryptocurrencies, with its most crucial point being the urge not to give them legal tender status.

The nine-point plan is described by the IMF executive board as "guidance to IMF member countries on key elements of an appropriate policy response to crypto assets”. The IMF added that a major reason for its introduction was the collapse of a number of crypto exchanges and that inaction from governments is “untenable”.

The first point in the plan is a plain refutation of cryptocurrency’s legitimacy. It calls on governments to “safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status."

Other advice on the list is also fairly damning to crypto advocates and the fundamental beliefs driving its initial ambitions of truly decentralised and unregulated finance. These include guarding against excessive capital flows, adopting unambiguous tax rules and laws around crypto assets, and developing and enforcing oversight requirements for all crypto market actors.

However it is that first point against granting crypto assets official legal standards which will come as the biggest blow to advocates who have pushed for currencies like Bitcoin and Ethereum to be legally recognised.

The IMF said that its directors agreed that widespread adoption of crypto “could undermine the effectiveness of monetary policy, circumvent capital flow management measures, and exacerbate fiscal risks.”

The directors also agreed that while strict bans on crypto “are not the first-best option”, crypto assets should not be granted official currency or legal status. Some directors, it said, believe that strict bans should not be ruled out.

This is not the first time that the IMF has rallied against crypto. In late 2021, the IMF criticised El Salvador when it became the first country to adopt Bitcoin as legal tender. The only other country to accept Bitcoin is Central African Republic.

Other nations such as the UK, USA and China are investing in their own Central bank digital currencies (CBDCs), though these are different to crypto assets in several important ways as they are not issued privately and have a stable value.

Elsehwere in crypto, the US Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have issued a warning to banks to be on guard for liquidity risks from cryptocurrency-related clients.

In a joint statement, the regulators said that banks should have robust tools in place to monitor funds placed by crypto-asset related entities and that such deposits could be subject to rapid outflows. Like the IMF’s plan, the US regulators said that the statement was inspired by recent crypto exchange crashes.

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