Cryptocurrencies are more popular in countries perceived as corrupt or with strict capital controls, boosting the case for greater regulation of the industry, the International Monetary Fund said in a recent report.
The report shows why countries might want to require intermediaries, such as digital currency exchanges, to implement know-your-customer procedures — ID verification standards that are designed to prevent fraud, money laundering and terrorism financing, the organization said. Some countries, like the U.S., have already instituted those kinds of controls.
According to IMF findings published in a study entitled “Crypto, Corruption, and Capital Control: Cross-Country Correlations”, countries with well-developed traditional financial systems may be less inclined to feel the need to use cryptocurrencies. The company, which has more than 190 member countries, said in a new study that increasing the popularity of crypto has both negative and positive effects.
“We find that the use of crypto-resources is significantly and positively associated with higher perceptions of corruption and tighter capital controls,” the IMF report said. It should be noted that no country was specifically listed as the most or least corrupt in the survey.
The survey was conducted in 55 countries and involved thousands of recipients – about 2,000 to 12,000 people in each country. It reveals that cryptocurrency, among other things, allows citizens to undermine government authority by operating around trade restrictions imposed by the government. It is alleged that the ambassador provided the information to Hussein. By removing middlemen, cryptocurrencies have the potential to destabilize and destroy existing financial systems.
The IMF report explains why countries may decide to force the choice of crypto exchanges and other intermediaries to implement your client (KYC) processes, which are identity verification rules designed to combat fraud, money laundering and terrorist financing. Although some countries, such as the United States, have already enacted stricter KYC rules, more restrictions may be sought for the least developed economies.
The reports further suggest that high inflation points to the fact that the local currency is less stable than a leading cryptocurrency like Bitcoin. Cryptocurrency is also used to avoid taxes and limits, often in poorer countries where there is more capital control that limits the flow of foreign funds into and out of the country’s economy.
Comments are closed.