Is cryptocurrency an opportunity or a threat for IMF？
As early as October 2017, Christine Lagarde, president of the International Monetary Fund (IMF), has stated to CNBC:
Global financial giants’ risk being blindsided by new financial innovations like cryptocurrencies, I think we are about to see massive disruptions.”
Compared to 2017, the IMF has more opinions and research on cryptocurrency. Let us review the attitude and views of the IMF on the cryptocurrency market in 2018.
What is IMF?
The International Monetary Fund (IMF) is based on the International Monetary Fund Agreement signed at the Bretton Woods Conference in July 1944. It was established at the same time as the World Bank and is listed as one of the world's two major financial institutions.
The main role of the IMF is to ensure stability of the International Monetary System (SMI) and the management of monetary and financial crises. Moreover, IMF provides technical and financial assistance to ensure that the global financial system is functioning properly.
What is the IMF’s attitude towards cryptocurrency in 2018?
April 2018 – IMF: IMF chief discuss the pros and cons of cryptocurrency
Previously, Christine Lagarde had published an article about the shortcomings of cryptocurrency. Lagarde said she had "researched the dark side of cryptographic assets, including their potential use in money laundering and the financing of terrorism."
In April, she published a blog post on the IMF website to the advantages of cryptocurrency advantage. The first benefit Lagarde pointed out was:
Crypto-assets enable fast and inexpensive financial transactions, while offering some of the convenience of cash.
The second point that Lagarde explores is that cryptocurrencies may bring a balance to the financial environment, as she detailed:
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.”
June 2018- IMF: Crypto assets such as Bitcoin may replace traditional payment methods one day
The International Monetary Fund (IMF) believe that bitcoin and other cryptocurrencies pose a serious challenge to the central bank's dominant position in global monetary policy. The market is likely to reduce the demand for money issued by the central bank in the future.
It is worth noting that the IMF recognizes that the central bank can play a huge role in controlling monetary and economic policies, including setting short-term interest rates in the interbank reserve interbank market. However, the rise of cryptocurrencies means that banks will no longer control these short-term interest rates, so their role in controlling monetary policy will be hit hard.
So, is it possible for cryptocurrencies to eventually replace fiat money?
For this issue, the International Monetary Fund has also raised many questions, such as whether the market demand for central bank currency will be reduced, whether the central bank's ability to control monetary policy and interbank lending rates will be affected, and whether the central bank will try to raise crypto-asset rate, and more.
In general, the International Monetary Fund believes that the central bank needs to maintain public confidence in the legal currency in order to stay ahead of the game in a multi-centered economy.
At this stage, many central banks are weighing whether to create their own central bank cryptocurrency. However, the International Monetary Fund said that each country needs to find a balance between interests and risks, otherwise it will bring additional risks to market operations.
October 2018 - IMF: Rapid growth of Bitcoin and crypto will impact global financial system
The International Monetary Fund (IMF) pointed out that the rapid development of bitcoin and cryptocurrencies may affect the international financial system. Meanwhile, cybersecurity vulnerabilities and cyber-attacks on critical financial infrastructure are another source of risk because they can disrupt cross-border payment systems and undermine the liquidity of goods and services. The continued rapid growth of crypto assets may create new vulnerabilities in the international financial system.
But experts are optimistic about this. Emin Gun Sirer, a well-known professor at Cornell University and also a highly respected expert in cryptocurrency and blockchain, said that the International Monetary Fund’s recognition of cryptocurrency as an asset class is an affirmation, he is optimistic in the cryptocurrency industry.
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This is a very interesting discussion. IMF is one of the oldest global institutions that still exists despite being shaped during the Bretton-Woods system and based on finance among industrial societies. CC provide new methods for dealing with global finance in the sense of that middle hands, as banks can be removed or reduced. Often, the case is that institutions as IMF are criticized for being "neoliberal" or "globalist" but in this case it is interesting that IMF chief actually provides also positive comments about CC that could are contributing to decentralization and "glocalization" of our world.
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Thank you for this great article. Was definitely helpful.
IMF has to think for the future as their whole purpose is to help keep economic stability by feeding cash to countries that are not doing well and charge them high interests on thise loans. Their advisory helps generally consist of recommendations as “opening up the country economy to the outside world, reduce assets owned by the state, privatization and stop producing if it’s economically viable. They think the global economy as a whole, fix the problems for the better of the whole, not the individual. It is kind of like the “Iron Bank” in bank of Game of Thrones. Works at the side of the strongest and make decisions based on math.
And now, they accept the fact Blockchain “will” happen and they won’t be able to stop it. So let’s make it work with the “system” and control somehow and make use of the best parts. I think they will fail though!
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With the Brenton Woods agreement there was a condition. The condition was that the Federal Reserve not print any more currency. That condition has not been met for a very long time, and is why the Brenton Woods agreement is void.