IMF: Bitcoin Mining Allows Countries to Monetize Their Energy Resources

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IMF Bitcoin mining

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The IMF made an inadvertent advertisement for Bitcoin warning that countries could use Bitcoin mining to monetize their energy directly.

Another feature not a bug was mentioned, as the IMF continued to say Bitcoin mining allows these countries to monetize their energy directly and outside the financial system.

A surge in Bitcoin and “crypto” use might endanger the global financial system, the IMF said Tuesday in their Global Financial Stability Report for April 2022 . The IMF observed that the Ukraine conflict, Bitcoin, and “crypto” revealed the vulnerabilities of the global financial system. 

Financial stability risks have increased as the financial system’s resilience is put to the test according to IMF Report

The repercussions of the conflict in Ukraine on the financial sector are discussed in Chapter 1 of the report.

In Summary

  • Commodity prices present central banks with difficult trade-offs to make. Many developing and frontier markets are experiencing particularly challenging conditions at the present time.
  • With continuous stress in the property sector and fresh COVID-19 breakouts, financial vulnerabilities in China have remained elevated for some time.
  • It is imperative that central banks take prompt action to prevent inflation from getting entrenched without endangering the economic recovery.
  • Policymakers will have to deal with the fundamental concerns that have been forced to the forefront as a result of the conflict, such as the trade-off between energy security and climate change.

The sovereign-bank nexus in developing economies is discussed in detail in Chapter 2 of the report while Chapter 3 explores the risks to financial stability posed by the fast expansion of riskier business categories in the fintech industry, as well as the solutions available.

In Summary

  • During the pandemic, bank holdings of domestic government bonds have increased dramatically in emerging nations.
  • As a result of the country’s historically large public debt and the deteriorating sovereign credit outlook, there is a danger of a negative feedback loop that might jeopardize macro-financial stability.
  • Policies that target both fintech companies and established banks in a proportional manner are required.
Sources: Bank for International Settlements; Bloomberg Finance L.P; BP, Statistical Review of World Energy, July 2021; Haver Analytics; JPMorgan Chase & Co.
Morningstar; UN Comrade; US Geological Survey; and IMF staff calculations.
Note: GFS = Global Financial Stability Report; NBFIs = Nonbank financial intermediaries.

Bitcoin is a ‘lifeboat’ amid financial turmoil and the IMF doesn’t like it

Bitcoin doesn’t care about what the IMF thinks though does it? Tick-tock and block-after-block it continues to grow in users, hash, nodes, and not to mention the Lightning Network explosion.

Jeff Booth, a well-known entrepreneur and author, has backed Bitcoin as a “must have” investment at a time when central banks are compounding the nation’s mounting debt crisis.

The statements were made as part of a Twitter conversation about the idea that central banks believe they can somehow avoid a large debt crisis by exponentially increasing the amount of debt they have.

These remarks came amid rising inflation. Fed Chair Jerome Powell indicated late August that the central bank would no longer see inflation as a major threat to economic development, that didn’t age well.

  • Government selected CPI at 8.5%
  • PPI at 11.2%
  • Commodities up 50%+ Year over Year

Earlier Powell announced that the Fed’s top brass had resolved to keep short-term interest rates at 0%–0.25% for years, with the possibility of inflation exceeding the 2% objective, that too didn’t age well with a likely 50 bps hike coming next FED meetup.

  • Like other central banks, the Fed can alter its mind on what constitutes acceptable and undesirable inflation rates.
  • This involves printing trillions of dollars for stimulus. Governments must debase their currencies to reduce the debt mountain they have built.

Jeff Booth is one of several Bitcoin supporters pointing out contemporary financial difficulties that resemble those of 2008.

His book The Price of Tomorrow warns of two alarming economic trends that he believes are often disregarded. It claims that technological advancements and price deflation will lead to widespread unemployment, while a debt-ridden global economy looms.

Considering this, Bitcoin may be one of the few surviving “lifeboats”.

The IMF advises governments to adopt global norms for “crypto” assets

  • Emphasizing that tighter monitoring of fintech businesses and decentralized finance platforms is required to limit their risks.
  • To regulate financial flows, foster international collaboration, fill data gaps, and harness technology, the international body advises governments to implement coordinated crypto legislation.
  • The IMF recommends establishing a Financial Action Task Force to enforce norms against illegal money flows.
  • The IMF’s advice comes as the Biden administration explores cryptocurrency regulation.
  • Officials are coordinating with foreign colleagues on crypto regulation. Legislators in both the House and Senate have proposed regulations for stablecoins, but none have gained momentum.

Bitcoin provides anyone an escape and empowers sovereign individuals

  • Because of Bitcoin’s unique nature, which has been seen in its users, sovereignty is an advantage of Bitcoin adoption that is sometimes missed.
  • Despite the fact that Bitcoin does not grant them ultimate control over others, it does ensure that everyone is on a level playing field.

According to Robert Breedlove, as stated at the Miami Bitcoin Conference 2022, if you are functioning within a group or country controlled by a set of rules and there is a person or group that can create exceptions you cannot, that individual or group is sovereign over you.

These individuals and groups have the authority to break the norms and exploit the unsovereign individual.

The most apparent component of Bitcoin’s ability to create sovereign individuals is the ability to transact and store your money without seeking authorization.

  • Nobody can make an exception for any Bitcoin owner who holds their Bitcoin wherever they want for whatever long they want.
  • This is conceivable if you run your own node and/or store your Bitcoin in a non-custodial wallet.
  • Central banks, on the other hand, possess fiat money and have the ability to make exceptions by printing more.

Money is a technology that allows you to store value through time.

So, if you utilize technology to hold the worth of you purchasing power, you should be able to use it whenever, whenever, and however you choose.

  • Bitcoin does away with the requirement for a commercial bank to securely store your assets and deal worldwide. This restores the individual’s sovereign capacity to keep significant quantities of cash without fear of a bank or government entity freezing your account unilaterally.
  • Central banks have the sovereign authority to produce fiat currencies, which eventually leads to the devaluation of existing currencies in which stakeholders have deposited their buying power.

This implies that you can put in a day’s labor that gets you say three meals, but when you preserve that value for later use, the sovereign central bank’s money printing consumes say one meal, and your saved value can now only buy two meals.

Bitcoin takes away this authority from central banks or actors like the IMF and assures that no one can make an exception for producing money and depreciating your investments.

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