Christine Lagarde, the IMF chief has published two blog posts about crypto and its advantages. She talks about the possibility of moving from currency issued by state governments to crypto. These posts are up on the official IMF website.
As of now the count of cryptocurrencies is 1,568 according to Coinmarketcap. Considering this abundance of cryptocurrencies she said, “it seems inevitable that many will not survive the process of creative destruction.” “The crypto-assets that survive could have a significant impact on how we save, invest and pay our bills,” according to Christine. “That is why policymakers should keep an open mind and work toward an even-handed regulatory framework that minimizes risks while allowing the creative process to bear fruit.”
Benefits of Crypto
The major benefit of crypto is the speed and inexpensiveness of transactions along with offering some of the ease of cash. The IMF chief spoke about this and said “Some payment services now make overseas transfers in a matter of hours, not days,” adding that “If privately issued crypto-assets remain risky and unstable, there may be demand for central banks to provide digital forms of money.”
She then spoke about the ability of cryptocurrencies to bring a potential balance in the financial landscape. “Tthe fintech revolution will not eliminate the need for trusted intermediaries, such as brokers and bankers,” she explained “There is hope, however, that decentralized applications spurred by crypto-assets will lead to a diversification of the financial landscape, a better balance between centralized and decentralized service providers, and a financial ecosystem that is more efficient and potentially more robust in resisting threats.”
No Immediate Danger
Regarding financial stability, the chief revealed, “Our preliminary assessment is that, given their still-small footprint and limited links to the rest of the financial system, crypto-assets do not pose an immediate danger.” However, precaution is a must and, she particularly mentions the need for regulators to remain alert about the potential of cryptocurrencies “to magnify the risks of highly leveraged trading, and to increase the transmission of economic shocks should they become more integrated into mainstream financial products.”
She further described, “Moreover, banks and other financial institutions will face challenges to their business models, should there be a large-scale shift away from government-issued currencies toward crypto-assets. Regulators might find it harder to ensure the stability of a more diffuse and decentralized financial system. Central banks might have more trouble acting as the lender of last resort in case of a crisis.”