The intranational monetary fund has warned Nigeria and other countries on the danger of adopting crypto assets as a national currency. Following plans by the Central Bank of Nigeria to launch its own crypto e-naira on the 1st of October the IMF was quick to issue out a warning.
The Central Bank of Nigeria had announced that it is ready to make a government-backed digital currency available for Nigerians in a bid to reduce the growing popularity of Bitcoin and other uncontrolled digital currencies.
In a post on their website on Monday, the International Monetary Fund warned that the adoption of a government-backed cryptocurrency would expose banks and other financial institutions to the volatility and fluctuations of the cryptocurrency market. According to IMF, the adoption of cryptocurrency as a national currency would weaken monetary policies and cause macroeconomic instability.
It listed other negative impacts of such move on the economy to include legal issues, highly unstable domestic prices, and decline in financial integrity. IMF said: “some countries may be tempted by a shortcut: adopting crypto assets as national currencies.” “many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risk and cost outweigh potential benefits. Moreover, widespread crypto assets use would undermine consumer protection. households and businesses could lose wealth through large swings in value, fraud, or cyber-attacks.”
It stressed that countries with stable inflation, exchange rates, and credible institutions would not record widespread adoption while cryptocurrency remains a vehicle to make money rather than a store of value.