IMF Warms Up to Bitcoin as Cross-Border Value Transfer, Bitwise Reports

IMF On Bitcoin Remittance Payments

The International Monetary Fund (IMF) is showing a newfound interest in the merits of Bitcoin as a medium of cross-border value transfer, according to a report by crypto fund manager Bitwise. In a Twitter thread by Bitwise CIO Matt Hougan, he highlighted a 43-page paper published by three IMF researchers on April 5, which delved into academic literature to assess Bitcoin’s role in international remittance payments.

Key Findings on Bitcoin Flows

The IMF paper examined on-chain and off-chain measures of international Bitcoin flows and found that these flows respond differently to traditional drivers. The research revealed that countries facing capital controls or limited access to the global economy are utilizing Bitcoin as a release valve, leading to significant cross-border Bitcoin transfers relative to their GDP.

For example, data from Chainalysis showed that cross-border on-chain Bitcoin flows in Venezuela averaged 0.8% of GDP between 2019 and 2022, highlighting the significant role of Bitcoin in countries with restricted capital flows compared to nations like Canada or the USA.

On-Chain VS Off Chain Flows

On-chain cross-border flows were found to align with crypto-specific sentiment, showing a negative correlation with broad dollar appreciation events and a positive correlation with stock market volatility. In contrast, off-chain Bitcoin flows were correlated with incentives to circumvent capital flow restrictions and were typically smaller than on-chain transactions. Both on-chain and off-chain flows positively correlated with high inflation rates in a given country.

IMF’s Changing Stance on Bitcoin

Bitwise’s Hougan noted that the IMF’s research on Bitcoin signifies a shift in their approach to cryptocurrency, indicating a growing recognition of its impact on the global economy. This marks a departure from the IMF’s previous criticisms of Bitcoin, including urging El Salvador to revoke its Bitcoin Law and proposing risk assessment measures for countries dealing with crypto adoption.

Overall, the IMF’s evolving stance on Bitcoin reflects a broader acknowledgment of the cryptocurrency’s role in cross-border value transfer and its implications for the global financial landscape.