The International Monetary Fund (IMF) has stated that Bitcoin is gradually becoming a key channel for cross-border capital flows in the global financial instability, especially in high inflation countries such as Argentina and Venezuela, where Bitcoin trading activity is particularly active.
In recent days, the decline in Bitcoin has been deeply affected by the Iran-Israel conflict, triggering a reassessment of its value (anti-inflation? Anti-war risk?) within the community. It is worth noting that the IMF recently released a report stating that Bitcoin is increasingly becoming a key channel for cross-border capital flows, replacing traditional banking systems, in the context of global financial instability.
The report points out that the use of Bitcoin in cross-border transactions is very common worldwide, whether it is off-chain or on-chain. The level of activity in various regions is relatively high. According to data from Chainalysis and LocalBitcoins, Figures 1 and 2 below respectively show the proportion of Bitcoin inflows to GDP in various countries. The report found that Bitcoin inflows in some Latin American countries, such as Argentina and Venezuela, are particularly high compared to other countries, with both countries ranking highest in the two data sources. In addition, relatively large inflows have been observed in several countries in Africa, Asia, and Eastern Europe.
Figure 1
Figure 2
The report concludes that residents of countries with strict financial regulations and facing severe inflation are turning to Bitcoin to transfer capital across borders more freely. In these regions, Bitcoin has become a necessary financial tool for wealth preservation and access to the global market, rather than just speculative investment. One of the authors of the report, Eugenio Cerutti, wrote:
However, the IMF report also cautions that the widespread use of Bitcoin for cross-border movement may bring potential risks. This is because the lack of regulation and the anonymity of cryptocurrencies may complicate the efforts of regulatory institutions to monitor and control financial transactions to prevent illegal activities such as money laundering.
Therefore, the IMF calls for the establishment of an international cooperation and regulatory framework covering the unique aspects of digital assets, in order to harness the benefits of digital currencies while suppressing risks, especially as a tool for economic freedom in countries with restricted financial environments.
On the other hand, the report also states that Bitcoin transactions exhibit unique characteristics compared to traditional capital flows. These transactions show higher correlation with intrinsic factors of cryptocurrencies, such as market volatility and user sentiment indices (such as fear and greed indices), rather than being sensitive to economic indicators such as monetary policy or exchange rate fluctuations, like typical foreign investments.
Furthermore, the report points out that on-chain Bitcoin transactions are often larger in scale than off-chain transactions, but in regions with strict financial regulations or insufficient banking services, off-chain transactions, although smaller, are more common. These transactions are usually conducted through platforms such as LocalBitcoins, highlighting the role of Bitcoin in supporting financial activities constrained by traditional financial infrastructure.
Finally, the report emphasizes that due to methodological differences, capital flows and cross-border Bitcoin flows should not be directly compared. However, they infer:
In other words, in a situation where global risk aversion increases or when seeking safe assets, people still rely more on traditional capital flows to react.
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