The managing director of the International Monetary Fund (IMF), Christine Lagarde has again addressed the topic of bitcoin and cryptocurrency. At a recent IMF event, Lagarde told reporters that virtual currencies will comprise the catalyst for “massive disruptions” within the financial markets and fintech industries.
Also Read: IMF Chief Lagarde Tells Central Bankers: “Not Wise to Dismiss Virtual Currencies”
Speaking at the IMF Annual Meetings in Washington D.C., Lagarde warned financial institutions that “we are about to see massive disruptions” as a result of cryptocurrency and distributed ledger technologies. The IMF head stressed the need for institutions and regulators to “adjust… to the impact of the combined breakthrough technologies that will impact markets.”
The IMF Managing Director indicated that the institution is considering experimenting with applications for distributed ledger technology. Lagarde discussed such in the context of the IMF’s ‘Special Drawing Right’, a currency created and administered by the IMF intended to function as an international reserve asset. Lagarde stated “what we will be looking into is how this currency, the special drawing right, can actually use the technology to be more efficient and less costly.”
Lagarde described bitcoin as a broad and nuanced phenomenon, dismissing those who claim that bitcoin is a ‘fraud’, or a Ponzi ‘scheme’. Lagarde told reporters “I think we should just be aware of not categorizing anything that has to do with digital currencies in those speculation, Ponzi-like schemes, it’s a lot more than that as well.”
The IMF head described distributed ledger technologies as having the potential to foster more inclusion within the financial sector, advocating for the adoption of such technologies in favor of cash. “I think of women in some of the developing countries that have to carry cash around who are at risk of violence and all the rest of it,” Lagarde stated. “If they can use their cell phone and operate in a much more discreet and efficient way, it would be terrific.”
Whilst there is a myriad of positive applications for distributed ledger technology in the third world, some from within the cryptocurrency community are skeptical of the IMF’s apparent desire to utilize a centralized blockchain as a means to intensify the ‘war on cash’ that is taking place in many emerging economies.
Throughout the press conference, the IMF managing director frequently alluded to the challenges that innovations within the fintech industries may pose to regulators in the near future. Lagarde stated that “a lot of work has been done in the last eight years in relation to financial regulations, trying to keep the banking sector safe and healthy in order to protect us from further risks down the road.”
Last month, Christine Lagarde cautioned central bankers that “it may not be wise to dismiss virtual currencies,” stating that “virtual currencies might just give existing currencies and monetary policy a run for their money”. Lagarde urged bankers not to ignore the innovation borne of cryptocurrencies, advocating that they remain “open to fresh ideas and new demands, as economies evolve.” In June, the IMF produced a report designed to offer regulatory guidance to national governments. The report advocated that “policymak[ers] will need to be nimble, experimental, and cooperative” in their efforts to address cryptocurrencies.
Do you think that the IMF Managing Director is right to caution financial institutions of the potential creative destruction that cryptocurrecy may unleash? Share your thoughts in the comments section below!
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Do you agree with us that Bitcoin is the best invention since sliced bread? Thought so. That’s why we are building this online universe revolving around anything and everything Bitcoin. We have a store. And a forum. And a casino, a pool and real-time price statistics.Samuel Haig is a cryptocurrency and economics journalist who has been passionately involved in the bitcoin space since 2012. Samuel has written about the disruptive potential of cryptocurrency with regards to the dialectical relations within contemporary neoliberal capitalism.