The International Monetary Fund (IMF) has released a report claiming that the usage, adoption, and popularity of cryptocurrencies are higher in corrupt nations. According to the IMF’s findings published in a study titled «Crypto, Corruption, and Capital Controls: Cross-Country Correlations,» residents of nations where the traditional financial system is well developed may be less inclined to feel the need to use cryptocurrency. The organisation, which has over 190 member countries, points out in its newest study that the surge in the popularity of crypto has both negative and positive effects.
“We find that crypto-asset usage is significantly and positively associated with a higher perception of corruption and more intensive capital controls,” the IMF report said. It should be noted that no countries were specifically listed to be the most or least corrupted in the survey.
The survey was conducted in 55 nations and involved thousands of takers — approximately 2,000 to 12,000 individuals in each country. It revealed that cryptocurrency, among other things, allows citizens to undermine government authority by working around government-imposed trade prohibitions. It also allegedly promotes criminal activities by assisting criminals in evading detection. By removing middlemen, cryptocurrency has the potential to destabilise and destroy existing financial systems.
The IMF report explains why countries may decide to compel the likes of crypto exchanges and other intermediaries to implement know-your-customer (KYC) processes, which are identity verification rules designed to combat fraud, money laundering, and terrorism financing. While certain countries like the US have already implemented strict KYC norms, more restrictions could be sought for lesser-developed economies.
The reports also suggest that the high inflation points to the fact that a local currency is less stable than a leading cryptocurrency like Bitcoin. Cryptocurrency is also used for escaping taxes and limits, more often in poorer countries where there are more capital controls that restrict the flow of foreign funds in and out of the country’s economy.
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