Why is the IMF so afraid of cryptocurrencies?

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

Recently, Argentina agreed to “discourage” the use of cryptocurrencies as a condition of receiving a $45 billion loan from the IMF. Less than a year ago, El Salvador’s plan to use Bitcoin as legal tender was met with strong protests from the IMF.

Argentina has been mired in a dire economic crisis for years, with consequences including high inflation. The country also has a large sovereign debt and a history of defaults, making it more difficult to borrow in traditional markets.

Meanwhile, Buenos Aires has emerged as an important hub for blockchain and cryptocurrency development, largely as the country’s economic and monetary turmoil has prompted residents to seek the relative stability and trustworthiness of cryptocurrencies like Bitcoin. Crypto companies and organizations in the country are reportedly still seeking clarity on what exactly its government means by “blocking” the use of crypto.

But if Argentines see cryptocurrencies as an effective way for them to personally cope with economic chaos, why would the IMF try to stop them?

The real purpose of the IMF

First, you have to understand the political history and true purpose of the IMF. The institution was established in 1944 with what was officially described as “avoiding a recurrence of the competitive currency devaluations that led to the Great Depression of the 1930s.”

Some will notice a bit of sleight of hand here. The Great Depression was largely over by the mid-1930s, and World War II was a more pressing matter than a hypothetical rerun. In fact, the IMF was created less to respond to the Depression than to prepare for the end of the war and the reconstruction of Europe.

And this reconstruction was not charitable but a strategic pillar of the then-emerging Cold War. Four years after the IMF was founded, the United States’ Marshall Plan sent large amounts of American money to help Europe recover from the war—and, just as importantly, to ensure that they were restored as part of the Western liberal democratic order rather than standing in the Soviet orbit.

The Marshall Plan became the blueprint for the Cold War’s economic front, and the IMF became the mechanism for bringing a hundred Marshall Plans to fruition around the world. For the next half century, its presence in the developing world was largely intended to stop the spread of communism. In exchange for funds, IMF members generally had to comply with various market reforms that tied them more deeply to the free-market Western order.

These conditions may include cuts to public sector wages, reductions in public pensions, cuts to social programs, policies to support the privatization of public services, and the abandonment of industrial policies and the opening of capital markets. The average IMF loan comes with 20 such conditions.

This IMF austerity program is often forced upon countries in crisis, making reforms essentially a form of forced extortion, what American political commentator Naomi Klein calls the “shock doctrine.” While they are promoted as “reforms” designed to “fix” developing economies, they often lead to deeper pain.

Klein and others argue that this makes the IMF essentially a stalking horse for global corporations seeking free-market reforms, using countries’ economic depression as leverage to implement policies that allow for greater economic extraction.

The collapse of the Soviet Union would seem to have reduced the relevance of the IMF, but like NATO itself, the IMF has continued to fight an absent enemy. A 2014 study found that conditionalities attached to IMF loans have actually increased since the end of the Cold War.

This context explains why the IMF is so actively against cryptocurrencies: its reason for existing is not to promote developing economies or help the individuals living in them. The IMF is not a neutral aid organization, but an economic arm of a vast power structure. It seeks to incorporate peripheral or developing countries—African and Latin American countries are a current priority—into the postwar neoliberal consensus.

Cryptocurrencies threaten that power, though that threat is a bit distant at the moment. Writing in the Center for Economic and Policy Research, Mark Weisbrot describes the IMF as a “gatekeeper” to a “creditor cartel” of Western funders, including the World Bank and the Inter-American Development Bank.

But as El Salvador has tried to demonstrate with its volcano bonds, and as its recent donation to Ukraine has made even more apparent, cryptocurrencies are not easy to gate. It seems likely that smaller countries such as El Salvador will soon have access to a parallel crypto-based debt and financing market over which the Western order has minimal influence.

This market would certainly be small compared to the entire global banking system, but even a small financial escape hatch could provide meaningful leverage to resist the IMF and its power-driven agenda. The IMF’s actions suggest that they foresee this possibility—and that they fear it.