The International Monetary Fund (IMF) has increasingly scrutinized cryptocurrencies amid their rising adoption by countries. While many nations explore digital assets to diversify their economies, the IMF emphasizes cautious regulation and highlights risks, especially concerning energy consumption and legal frameworks. Pakistan’s Bitcoin Ambitions and IMF Concerns Just recently, Pakistan officially announced its strategic Bitcoin reserve at the Bitcoin Vegas 2025 conference. The country revealed plans to hold Bitcoin as a long-term investment and integrate digital assets into its economy. Pakistan’s government also aims to utilize excess electricity for Bitcoin mining, seeking to convert idle energy into economic value. The Pakistan Digital Asset Authority (PDAA) regulates crypto businesses, and the National Crypto Council, established in early 2025, monitors the digital asset sector. Notably, Binance founder Changpeng Zhao joined this council as an adviser to help shape crypto regulations and blockchain infrastructure development. Despite this progress, the IMF remains concerned about Pakistan’s cryptocurrency approach. According to a local report, Pakistan faces ongoing energy shortages, and the IMF questions whether Bitcoin mining will lead to power deficits. The Fund has demanded explanations from Pakistan’s Finance Ministry on controlling electricity consumption by miners and data centers. IMF Proposals on Energy Taxes and Environmental Impact In another development, the IMF economists Shafik Hebous and Nate Vernon-Lin recently issued a paper proposing increased energy taxes to curb carbon emissions from crypto mining and AI data centers. The paper recommends an 85% electricity price increase for crypto miners globally. This tax could generate $5.2 billion annually and reduce carbon emissions by 100 million tons, the equivalent of Belgium’s current emissions. The IMF notes that combined electricity demand from crypto mining and data centers accounted for 2% of global electricity in 2022, and is expected to rise to 3.5% by 2027. This rise would match Japan’s current electricity consumption, leading to 450 million tons of carbon emissions annually, or 1.2% of the global total. Following this, the IMF suggests targeted electricity taxes, slightly lower for data centers because of their use of greener energy. The funds raised could promote energy-efficient equipment and incentivize less energy-intensive mining methods. The IMF also supports credits for renewable energy certificates. Currently, many crypto miners and data centers benefit from income and property tax exemptions and incentives despite their environmental impact and strain on power grids. The IMF warns that without these taxes, the net benefits of crypto special tax regimes remain unclear. It stresses the need for international coordination to prevent miners from relocating to countries with lower energy taxes. Lessons from El Salvador’s Bitcoin Policy and IMF Conditions As it is known, El Salvador was the first country to adopt Bitcoin as legal tender. Despite signing an agreement with the IMF to limit Bitcoin purchases, Nayib Bukele seems to be on an adoption spree. Continued purchases against IMF advice have been seen. The IMF insisted on restrictions, including halting additional Bitcoin acquisitions and limiting government involvement. Source: NAYIB BUKELE PORTFOLIO TRACKER Over the last month, El Salvador acquired 30 BTC, increasing reserves to over 6,196 BTC, worth more than $650 million. Despite the IMF’s stance, the government remains committed to its Bitcoin strategy. In an official press release, the IMF completed an initial review of El Salvador’s $1.4 billion loan arrangement and approved a $120 million payment. However, the IMF set conditions: El Salvador must limit Bitcoin accumulation and cease public access to the Chivo Bitcoin wallet by July 1, 2025. Source: IMF (Press Release No. 25/162 The IMF emphasized that the government should maintain Bitcoin reserves at current levels without further increases. IMF’s Updated Classification of Cryptocurrencies In early 2025, the IMF updated its global balance of payments framework to formally include cryptocurrencies. The new guidelines, part of the seventh edition of the Balance of Payments Manual (BPM7), classify digital assets into fungible and non-fungible tokens and define their recording in international financial accounts. Bitcoin and similar cryptocurrencies without issuer liabilities are treated as non-produced, non-financial capital assets. Cross-border Bitcoin transactions will now appear in capital accounts as acquisitions or disposals of non-produced assets. Stablecoins, however, are categorized as financial instruments, on par with traditional financial assets. The IMF also distinguishes equity-like crypto assets such as Ethereum and Solana. These tokens represent foreign equity investments when held internationally. The guidelines acknowledge staking and yield-generating activities, suggesting that rewards from these holdings resemble dividends and should be recorded accordingly. The IMF’s View on Security Classification of Altcoins The IMF’s recent report indirectly classifies certain altcoins as debt-bearing securities. While Bitcoin’s mining process removes it from liability classification, utility tokens fall under this category. This distinction aligns with ongoing regulatory debates, such as the U.S. SEC’s lawsuit over Ripple’s XRP token. A U.S. court ruled that XRP sales to institutional investors were unregistered securities offerings, but sales on public exchanges were not. Following the IMF’s classification, industry experts speculate XRP could be permanently considered a security. Ripple’s CTO argued that if XRP qualifies as a utility token or security, then Bitcoin and Ethereum would also fit those definitions, reflecting the complexity of crypto classification. IMF’s Cautious Approach to Cryptocurrency Explained The IMF maintains a cautious, regulatory-focused stance on cryptocurrencies. It urges countries to clarify legal frameworks, manage environmental impacts, and impose targeted taxes on energy use by crypto miners and data centers. The IMF supports monitoring digital asset holdings closely, as seen in its agreements with El Salvador and scrutiny of Pakistan’s Bitcoin reserve plans. The Fund’s updated classification of cryptocurrencies reflects the growing role of digital assets in the global economy while emphasizing transparency and fiscal discipline. Cross-border coordination on energy taxation and regulatory standards remains a priority to avoid jurisdictional arbitrage. As countries like Pakistan and El Salvador push forward with Bitcoin adoption, the IMF’s conditions and warnings highlight the challenges of balancing innovation, energy consumption, and financial stability.