Digital Currencies As Legal Tender- IMF

Question 1

What are the benefits of granting crypto legal tender status?

What are the drawbacks?

Answer 1

1. Fast and cheap payment
2. Financial inclusion
3. Seamless cross border payments
4. Risks to macroeconomic Stability
5. Financial integrity
6. Consumer protection
7. Environment

Question 2

What are the risks to macroeconomic stability arising from legal tender (crypto)

Answer 2

Firms and households will spend time away from productive activity deciding how to price goods and services.

Governments will be exposed to exchange rate risk if takes are quoted in crypto while expenditures in traditional currency.

Monetary policy loses bite because they cannot set interest rates on foreign currency.

This would result in massive flucarions in the prices of goods and services due to high volatility.