Ines AissaniThe IMF published a survey » A Primer on Bitcoin : Cross-Border Flows Measurement and Drivers » which highlights the cross-border flows of Bitcoin exchanges. The authors show how Bitcoin, thanks to its decentralized nature, is particularly used to bypass traditional banking systems, in regions plagued by monetary instability or strict capital controls.
This study, which may seem anecdotal at first glance, nevertheless indicates a new stage in the understanding of bitcoin on the part of international financial institutions. Of course, the report only commits the authors and is not absolutely representative of the IMF's line of thinking as a whole.
However, this shows that economists and traditional finance experts are beginning to realize that bitcoin is indeed an unstoppable financial tool for many populations around the world, and more specifically those belonging to the "Global South". It is in fact the populations of emerging countries that are experiencing stronger growth and recording more profits with cryptocurrencies.
Bitcoin: “A necessary financial tool” to preserve wealth in a context of financial instability
The new acceptance of Bitcoin by the IMF is the result of several factors. First of all, Bitcoin has become an essential reality in the global economy. The recent appearance of bitcoin ETFs in the United States is a striking example. Its market capitalization now exceeds that of many large companies and financial institutions. This growing popularity both at the level of individuals and institutions led the authors of Study I to recognize the importance and legitimacy of Bitcoin as a form of currency.
Additionally, the IMF recognizes the potential benefits of Bitcoin in terms of reduced transaction costs and financial inclusion. Transactions made with Bitcoin are generally cheaper and faster than traditional money transfers. Even more, Bitcoin can help bridge the financial gap by allowing unbanked people to access financial services that were previously inaccessible to them.
It is also emphasized that the IMF study is also motivated by geopolitical considerations. By allowing countries to diversify their foreign exchange reserves and reduce their dependence on traditional currencies, the authors say this could strengthen global financial stability and mitigate the risks associated with economic and political crises. This is certainly the most important point of the study.
Strong use of bitcoin exchanges in emerging countries
The authors of the study state: “Countries that tend to experience relatively large capital flows generally have smaller Bitcoin flows. (…) Bitcoin flows are largest in advanced economies with sophisticated financial markets, while Bitcoin flows are generally largest in emerging and developing markets.”
According to the IMF, residents of countries with restrictive financial regulations are turning to Bitcoin to move their capital more freely across borders. The study then recalls data from reports established by Chainalysis which show that transaction volumes are greater in countries such as Argentina, Venezuela, Moldova and Nigeria where citizens are faced with hyperinflation and strict financial controls.
In these regions, Bitcoin has become a necessary financial tool to preserve wealth and access global markets and is not seen solely as a mere speculative investment, as is rather the case in more developed countries.
The impact of Bitcoin on the global economy
The IMF study highlights the fact that the legitimacy and recognition of Bitcoin as a form of currency is becoming ever stronger. More and more people and institutions are adopting Bitcoin as a means of payment and as a safe haven.
This state of affairs could lead to a new distribution of wealth in the world and to question the monopoly of traditional currencies issued by central banks such as the dollar or the euro. The use of cryptocurrencies is in fact a "symptom" of financial imbalances rather than a cause, the authors point out.
To conclude, the authors also warn of the potential risks associated with the widespread use of Bitcoin for cross-border flows, in a context where regulations are lacking. They call for international cooperation and regulatory frameworks that encompass the unique aspects of bitcoin and other cryptocurrencies.
Such measures would help mitigate risks while harnessing the benefits of digital currencies, including as tools for economic freedom in countries with restrictive financial environments.
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