IMF Says Crypto Usage Significantly Correlated with Corruption and Capital Controls
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The International Monetary Fund (IMF) says that an examination of crypto asset adoption reveals it is correlated with corruption and capital controls.
In a new study, the IMF says that the use of cryptocurrencies is “significantly and positively” linked with corruption and capital controls, or restrictions placed on a domestic economy to limit the inflow and outflow of foreign money.
“Empirical investigation of the factors underlying the growing usage of crypto assets is in its infancy, owing to data limitations. In this paper, we present a simple cross-country analysis drawing on recently released survey-based data.
We explore the correlation of crypto asset usage with indicators of corruption, capital controls, a history of high inflation, and other factors. We find that crypto asset usage is significantly and positively associated with corruption and capital controls.”
The IMF says that crypto would benefit from tighter regulations such as requiring exchanges platforms to implement stringent know-your-customer (KYC) procedures, as opposed to taking a more “laissez-faire stance.”
IMF researchers also say that crypto technology exacerbates some of the problems presented by the use of cash, such as the ability to send large amounts of nearly untraceable funds across national borders.
“The pseudonymity of crypto assets (whereby transactions require only digital identities) makes them a potential vehicle for illicit flows, including flows of proceeds from corruption. This pseudonymity is not an intrinsic feature of the underlying technology, but rather a choice made in the design and practice of most currently existing crypto-assets.
Whereas cash provides full anonymity and large denomination bills have long been considered an aid for crime and tax evasion, crypto assets in their current form make it possible to move even larger amounts speedily and with greater ease, including across national borders.”
Ultimately, the report says that more information is needed to determine the motivation behind entities and individuals adopting virtual assets.
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