Are crypto and corruption related?
The IMF is no stranger to criticising the use of crypto. It has demonstrated that through repeated criticisms of El Salvador’s adoption of Bitcoin as an official currency. The organisation does have a vested interest in taking a stance against crypto. With that context, the IMF has produced a report that suggests a link between national corruption and crypto.
Related reading: El Salvador and the IMF spar over Bitcoin adoption.
“We find that crypto-asset usage is significantly and positively associated with higher perception of corruption and more intensive capital controls,” the report states. “Notwithstanding the data limitations, the results support the case for regulating crypto-assets, including know-your-customer approaches, as opposed to taking a laissez-faire stance.”
In other words, the IMF believes that unregulated crypto presents an opportunity to transfer illegitimate wealth worldwide.
Poorer nations most at risk
The correlation between poorer nations and corruption or wealth laundering is well-known at this point. The IMF is now suggesting that crypto is an extension of that correlation. In many of these poorer nations inflation is rampant, and crypto is appealing because it can be more stable than the local currency. Furthermore, these poorer nations tend to have higher levels of capital control, meaning that cryptocurrencies could be a way to avoid taxes and regulation for the first time for the people of that nation.
This report comes soon after the EU started targeting crypto for the way that Russia, struggling under the weight of international sanctions, was using digital assets to get around financial markets isolation.