Brazil’s central bank has adopted IMF policies refusing the classification of cryptocurrency. The decision to use the guidelines developed by the IMF for bought and sold crypto assets was made on the 26th of August, 2019.
The guidelines adopted by the Central Bank of Brazil classify traded cryptocurrencies as financial products. This means that crypto assets will appear as goods on the central bank’s balance sheet.
Central banks around the world are required to maintain a balance sheet which shows the bank’s overall financial position, the assets in the bank’s possession, its equity, and its liabilities.
Cryptocurrency trading is done through foreign exchange contractors. Due to this reason, Brazil’s central bank considers crypto trading as part of the imports and exports executed in the country.
Brazil is generally an importer of cryptocurrency, and this has resulted in a lower trade surplus appearing on the central bank’s balance sheet.
Crypto adoption in Brazil
The classification guidelines adopted by Brazil’s central bank will be vital for the mainstream adoption of crypto assets in the country. Classifying these digital assets as goods means that they could be now used for payments.
Although this has not been explicitly made clear, the classification implies that cryptocurrency can be included in payment mechanisms used in Brazil.
Adoption of the IMF classification guidelines came after they were recommended by The Balance of Payments Statistics Committee. The committee serves as an advisory body to the IMF’s Statistics Department.
Concerns about Libra
The IMF has expressed concerns about Facebook’s Libra and its implications for monetary systems across the world.
Gita Gopinath, the IMF’s chief economist, said that regulatory bodies should be vigilant in their observation and actions against Facebook’s proposed digital asset.
In his comments, Gopinath said that regulatory authorities should act immediately against Libra. He added that Libra could lead to backdoor dollarization in countries that do not have a reserve currency.
The chief economist reiterated that there needs to be enough checks and balances in place to stop Libra from being used in financial crimes such as money laundering.
American authorities have also raised the concerns raised by Gopinath. Facebook’s representatives have appeared before the US’ senate to answer questions about the proposed cryptocurrency and how it would work.
One of the main concerns the authorities have pertains to the privacy issues Facebook has had in the past.