Andorra, a small landlocked country located between France and Spain, sought technical advice from the International Monetary Fund (IMF) regarding the recording of Bitcoin (BTC) transactions. In response, the IMF conducted a technical assistance mission in September 2023, focusing on improving Andorra’s balance of payments statistics, which involves documenting economic transactions between residents and non-residents.
Known for its ski resorts and reputation as a tax haven, Andorra requested assistance on various topics, including the challenge of recording cryptocurrency transactions. The Andorran Financial Authority (AFA), the country’s financial regulator, informed the IMF that banks in Andorra must obtain prior approval before recording Bitcoin and other crypto asset transactions. However, no banks have yet requested this approval.
The IMF provided several recommendations to Andorra, including the suggestion that the AFA oversee the monitoring of crypto asset transactions and positions until September 2024. This recommendation was given medium priority, and Andorra can use the information gathered to compile its macroeconomic statistics.
In a related context, the IMF conducted a study that revealed digital currencies can serve the unique currency needs of Pacific Island countries (PICs). These countries, such as Papua New Guinea, Fiji, Palau, Tonga, and others, are small, diverse, and geographically isolated markets. The IMF released a departmental paper titled “Rise of Digital Money: Implications for Pacific Island Countries” to highlight these findings.
While recognizing the potential benefits of digital currencies, the IMF cautioned against the use of unbacked cryptocurrencies as national currency. Instead, the IMF proposed a regional approach to digital money to address challenges like scalability and economic volatility.
Overall, the IMF urged caution and deliberate action regarding digital currencies, advising the island nations to refrain from introducing a central bank digital currency (CBDC) due to unpreparedness.
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