Why Is the IMF So Afraid of Cryptocurrency?

The IMF is not a neutral aid organization, but the economic arm of a vast power structure. Crypto threatens that power.

AccessTimeIconMar 18, 2022 at 5:39 p.m. UTC
Updated May 11, 2023 at 5:08 p.m. UTC
AccessTimeIconMar 18, 2022 at 5:39 p.m. UTCUpdated May 11, 2023 at 5:08 p.m. UTCLayer 2
AccessTimeIconMar 18, 2022 at 5:39 p.m. UTCUpdated May 11, 2023 at 5:08 p.m. UTCLayer 2

It seems increasingly clear that opposition to cryptocurrency can be considered an official position of the International Monetary Fund (IMF), and we can expect anti-crypto restrictions to become a common condition of its loans to economies in crisis.

Most recently, Argentina has agreed to “discourage” the use of cryptocurrency as a condition of a $45 billion loan from the IMF. The announcement comes less than a year after El Salvador’s plan to use bitcoin as legal tender met with vocal complaints from the IMF ahead of negotiations on a loan with that country.

Argentina has been mired in a dire economic crisis for years, with fallout including high inflation. The country also carries huge sovereign debt and has a history of default, making borrowing on conventional markets more difficult.

Meanwhile, as laid out by The Block, Buenos Aires has become a significant center of blockchain and crypto development, substantially because the country’s economic and monetary chaos has pushed residents to seek the relative stability and trustworthiness of crypto like bitcoin. Crypto companies and organizations in the country are still reportedly seeking clarity on what exactly it would mean for their government to “discourage” the use of crypto.

But if Argentines have decided that crypto is a useful way for them to individually cope with economic chaos, why is the IMF trying to stop them?

The IMF’s real purpose

To understand what’s going on here, you have to understand the political history and true purpose of the IMF.

The agency was founded in 1944, in what the official narrative describes as an attempt to “avoid repeating the competitive currency devaluations that contributed to the Great Depression of the 1930s.”

Sharp eyes will notice some sleight of hand here. The Great Depression largely ended by the mid-1930s, and the early 1940s were marked by something much more pressing than a hypothetical repeat: World War II. In reality, the IMF was founded less as a response to the Depression than as preparation for the end of the war and the reconstruction of Europe.

And that reconstruction was not philanthropic, but a strategic pillar of the then-emerging Cold War. Four years after the founding of the IMF, the U.S. Marshall Planhttps://history.state.gov/departmenthistory/short-history/Truman sent huge amounts of American capital to help Europe recover from the war – and, equally important, to make sure they recovered as part of the Western liberal-democratic order, rather than in the orbit of the Soviet Union.

The Marshall Plan became something of a blueprint for the economic front of the Cold War, and the International Monetary Fund became the mechanism for letting a hundred Marshall Plans bloom across the globe. Its presence in developing nations over the next half-century was in large part meant to forestall the spread of Communism. In exchange for its funds, IMF member states have generally had to comply with a variety of market reforms that connect them more deeply to the free-market Western order.

Those conditions can include wage cuts for public sector workers, the reduction of public pensions, the cutting of social programs, policies that favor privatization of public services, the abandonment of industrial policy and the opening of capital markets. The average IMF loan comes with 20 such conditions.

This IMF austerity program is often imposed on countries in the midst of crisis, making the reforms essentially a form of extortion under compulsion, or what American political commentator Naomi Klein has called “The Shock Doctrine.” And while they are advertised as “reform” measures intended to “fix” developing economies, they have just as often led to even deeper misery.

Klein and others have argued that this makes the IMF fundamentally a stalking horse for global corporations seeking free-market reforms, using countries’ economic desperation as leverage for imposing policies that allow greater economic extraction.

The collapse of the Soviet Union might seem to make the IMF less important, but much like NATO itself, the IMF has continued to pursue its fight against an absent enemy. How does an anti-communist organization behave once communism has been defeated? Apparently, much like a cult member whose chosen prophecy fails, it doubles down: a 2014 study found that the number of conditions attached to IMF loans had actually increased since the end of the Cold War.

This context suggests why the IMF is so aggressively anti-crypto: Because at the highest level, its reason for existence is not to boost developing economies or help the individuals who live within them. The IMF is not a neutral aid organization, but the economic arm of a vast power structure that frequently hides itself behind the language of uplift and reform. It seeks to draw peripheral or developing nations – African and Latin American countries being a current high priority – into the postwar neoliberal consensus.

Crypto threatens that power, even if the threat is somewhat distant for now. Mark Weisbrot, writing at the Center for Economic and Policy Research, describes the IMF as a “gatekeeper” for a “creditors’ cartel” of Western funders also including the World Bank and the Inter-American Development Bank.

But as El Salvador is attempting to demonstrate with its Volcano Bond, and as donations to Ukraine have recently shown even more dramatically, cryptocurrency is not easy to gatekeep. It seems very plausible that smaller nations such as El Salvador will before long have access to a parallel crypto-based debt and financing market over which the Western order has only tenuous influence.

That market will certainly be small relative to the overall global banking system, but even a small financial escape hatch could provide meaningful leverage for pushing back against the IMF and its power-driven agenda. The IMF’s own actions suggest they foresee that possibility – and they’re scared to death of it.

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David Z. Morris

David Z. Morris was CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.