While the war in Ukraine continues to raise concerns over sanctions evasion, the International Monetary Fund says governments should ensure they have the ability to impose capital controls on crypto and traditional assets.
Citizens of countries that are crisis-hit, like Greece and Argentina, might be restricted from using bitcoins, as well as withdrawing cash from ATMs or using foreign currency.
- “There should be a review of foreign exchange and capital flow management laws and regulations, even if crypto assets are not formally financial assets or foreign currencies,” according to an IMF financial stability report dated Tuesday
- “The war in Ukraine has also brought attention to some of the challenges regulators face when applying sanctions and managing capital flows,” the statement added, citing the risk that cryptocurrency-based evasion will become ‘more widespread’.
The IMF admits that bitcoin transfers are “impractical,” and warns that some would-be users are turning to less scrupulous services or using other methods like mixers in order to evade sanctions.
- Besides allowing emerging market countries to effectively exchange energy for bitcoin through crypto mining, the IMF said cryptocurrency mining could undermine the ability of states to halt capital flight during times of financial uncertainty.
- The IMF officials admitted to reporters that virtual assets are probably not being used to circumvent financial restrictions on Russia following the publication of the report.
- Tobias Adrian, director of the IMF’s Monetary and Capital Markets department, cited data on Tether stablecoin transactions and prices as evidence that there is not much happening in terms of undermining sanctions via crypto assets. “We’re watching it extremely closely,” he said.
Earlier this year, the IMF warned that a lack of regulation of crypto could create instability and fraud. Christine Lagarde, president of the European Central Bank, has previously stated that crypto is being used to evade financial sanctions imposed on Russia, despite little evidence to back up her claim.