In Georgia, for example, which accounts for about 15% of global Bitcoin mining, companies receive an estimated $700 million from Bitcoin mining annually. This represents about 5% of the country’s GDP, or 10% of exported goods and services.
Cross-border transactions on crypto assets are already relevant and have already had a considerable impact on the domestic economy of some countries. For example, last month, the Central Bank of Brazil (BACEN) reviewed the Brazilian Trade Balance for crypto assets with new classifications under IMF standards.
Crypto assets and international guidelines
The fact is that the sudden rise of crypto assets could pose challenges to central banks, compete with official fiduciary currencies, and have an effect on monetary policy on many levels. At this stage, monetary authorities around the world are concerned about following the advance of crypto assets. However, this monitoring has been hampered for two reasons.
The first is because there were no crypto assets when the most recent revision of macroeconomic statistics manuals took place – published, for example, by the Organisation for Economic Co-operation and Development, the United Nations Statistics Division, the Economic Research and Statistics Division of the World Trade Organization, etc. There are no international guidelines available except for a reference in the Monetary and Financial Statistics Compilation Manual and Guide issued by the International Monetary Fund (IMF).
The second reason is because the classification of crypto assets and their regulation varies greatly from country to country, and either it hasn’t been defined yet or it’s been changing in various countries.
Thus, while aware of the difficulty of qualifying the essence of cryptocurrency and monitoring something still under development, the IMF decided to provide guidance on crypto asset categories and recommend specific statistical treatment according to current standards. Therefore, the IMF published the Treatment of Crypto Assets In Macroeconomic Statistics, with the caveat that such guidelines may need to be revised if conditions change substantially in the future.
This paper provides recommendations on the statistical recording of cross-border transactions associated with Bitcoin-like crypto assets (BLCAs), differentiates digital tokens and BLCAs, explains the mining process, and provides guidance on how to measure mining activity output, among others.
Crypto assets’ regulation in Brazil
The recent move by the Central Bank of Brazil shows a change of position that, until then, did not see risks in digital currency transactions for the national financial system, considering that transaction volume is still very low.
After mentioning the IMF’s recommendation to classify the buying and selling of crypto assets (especially those for which there is no issuer) as nonfinancial assets produced, the Brazilian central bank now says it will consider the buying and selling crypto assets in the country’s trade balance.
Note that BACEN did not define crypto assets, but simply said it will follow the IMF’s recommendation for the preparation of macroeconomic statistics, considering transactions with crypto assets as nonfinancial assets produced for the calculation of the Brazilian trade balance.
Types of crypto assets
Importantly, the IMF guidelines adopt the term “crypto assets” (following the recommendation of the G-20), and categorizes crypto assets as two basic types:
- BLCAs, which are blockchain-based crypto assets designed to function as a trading instrument such as Bitcoin, Ether, EOS, Stellar and Litecoin.
- Crypto assets that are not BLCAs (i.e., digital tokens).
While BACEN has shown on other occasions that it understands the difference between tokens, cryptocurrencies and digital currencies, it is silent on the IMF’s distinction between the categories of crypto assets for purposes of macroeconomic statistics.
However, by not clarifying how digital tokens will appear in macroeconomic statistics, BACEN may have difficulty monitoring the real impact of crypto assets in Brazil. This is because the classification of digital tokens in macroeconomic statistics depends on the category of tokens (payment tokens, utility tokens, asset tokens and hybrid tokens).
On the other hand, BACEN has announced that mining activity is now treated as a production process, as stated in the IMF guidelines. As a consequence, transaction fees can be viewed as a payment for transaction verification services. If the transaction fee payer is a nonresident, the miner is exporting transaction verification services to a nonresident.
Note that mining output, according to the IMF, can be measured as the sum of the transaction fee and the newly extracted BLCAs.
Thus, the second part of mining (i.e., newly extracted BLCAs) can be considered a produced asset resulting from mining.
Also, the monetary authority of Brazil said that, because they are digital, crypto assets have no customs registration, but purchases and sales by residents in Brazil imply the conclusion of foreign exchange contracts.
The obligation to observe exchange rules in transactions with crypto assets and other related instruments, however, had already been expressly emphasized by BACEN in 2017.
In addition, the Central Bank of Brazil’s press release concludes that export and import statistics for goods now include purchases and sales of crypto assets. This is justified because Brazil is a net importer of crypto assets, which contributes to the reduction of the trade surplus in the account balance of payment goods.
Has BACEN decided to include crypto assets in the country’s macroeconomic statistics, due to the increase in the buying and selling volume of crypto assets in retail and the growing interest shown by the traditional financial market?
Regardless of the answer, an honest assessment of the impact of crypto assets is needed, realizing the new opportunities, competitiveness, growth and social integration offered by this innovation.