Andorra Seeks IMF Assistance to Monitor Crypto Assets, IMF Advises Caution on Digital Currency Implementation in Pacific Island Countries
Crypto News – Andorra, a landlocked country nestled between France and Spain, has reached out to the International Monetary Fund (IMF) seeking technical guidance on a range of issues, notably the effective monitoring of crypto assets.
Responding to Andorra’s request, the IMF provided tailored advice, particularly on the recording of Bitcoin transactions. This assistance came as part of a broader technical assistance (TA) mission conducted in September 2023, aimed at bolstering the country’s balance of payments statistics, crucial for tracking economic transactions between residents and non-residents.
Renowned for its picturesque ski resorts and status as a tax haven, Andorra sought assistance on 56 fronts, including its challenge in accurately documenting cryptocurrency transactions. In addressing this concern, the IMF report delineated both the existing guidelines for recording Bitcoin-type crypto assets and anticipated updates in forthcoming international standards.
In discussions with the Andorran Financial Authority (AFA), the country’s financial regulator, it was disclosed that banks in Andorra require prior approval for recording Bitcoin and other crypto asset transactions. However, as of yet, no such requests have been made.
The IMF recommended that the AFA take charge of overseeing the monitoring of crypto asset transactions and positions until September 2024, with this recommendation being accorded medium priority. This initiative is expected to furnish Andorra with invaluable insights for compiling its macroeconomic statistics.
Meanwhile, a recent IMF study revealed the potential for digital currencies to address the unique currency needs of Pacific Island countries (PICs). These countries, characterized by their small size, diversity, and geographical isolation, include Papua New Guinea, Fiji, Palau, Tonga, Tuvalu, Samoa, Vanuatu, Micronesia, Kiribati, Nauru, the Marshall Islands, the Solomon Islands, the Cook Islands, and Niue.
However, the IMF cautioned against the adoption of unbacked cryptocurrencies as national currency. Instead, it advocated for the development of a regional approach to digital money to mitigate issues such as scalability constraints and economic volatility.
The report highlighted that certain PICs are particularly susceptible to currency substitution by crypto assets and stablecoins due to inherent weaknesses in their domestic monetary systems and the absence of publicly supported digital assets like central bank digital currencies (CBDCs).
In conclusion, the IMF report advocated for a cautious, measured approach to digital currency adoption, advising island nations to postpone plans for introducing CBDCs until adequate preparedness is achieved.
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