Central banks try to block attempts by poor countries to use digital currency to upend monetary norms.

Ben Shreckinger

"We accept Bitcoin" is announced at a barber shop in Santa Tecla, El Salvador.

In Argentina, a runaway inflation rate that is now close to 60 percent has led citizens to embrace cryptocurrency. It also led President Alberto Fernández to openly toy with making Bitcoin legal tender before the government’s recent commitment to the IMF to crack down on cryptocurrency. 

The IMF, whose work on cryptocurrency includes recent consultations with India on that country’s forthcoming policy framework, has called for a coordinated international government response to the rise of cryptocurrency. Though the fund has discouraged the use of a crypto network like Bitcoin as a currency, it has encouraged national central banks to explore the use of Bitcoin’s underlying blockchain technology for digital upgrades to their own sovereign currencies. A transition to central bank digital currencies, knowns as CBDCs, would be less disruptive to existing monetary arrangements than the changes sought by cryptocurrency backers.

On Tuesday, the Bank for International Settlements, an international body owned by the world’s central banks, launched its own latest salvo against cryptocurrency with a new report arguing that fragmentation in the world of cryptocurrency means that “crypto cannot fulfil the social role of money.” 

Instead, the report called for updating the national and supranational currencies overseen by its members. “There is more promise,” it states, “in innovations that build on trust in sovereign currencies.” 

In the meantime, the conflicts brewing between developing countries and global financial powers over digital money are also exposing the rifts within each.

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