The International Monetary Fund (IMF) Chief, Christine Lagarde is known for her regular blogs and her last two blog posts have been dedicated to cryptocurrenices. Her latest blog post outlines the benefits of cryptocurrencies and what could happen if and when there is a major shift to these digital currencies.
The Managing Director of the IMF in her newest blog post which was done just yesterday Tuesday 17th April, 2018 outlined the benefits of cryptocurrencies. This comes after her previous post which bordered on the risks of cryptocurrencies – in her post yesterday, she stated that she first drew the dark sides of cryptos including its possible use for money laundering in her earlier post in order to create a sort of a foil in comparison to its benefits.
“Here, I want to examine the promise they [cryptocurrencies] offer. A judicious look at crypto-assets should lead us to neither crypto-condemnation nor crypto-euphoria”
She further said that;
“Crypto-assets enable fast and inexpensive financial transactions, while offering some of the convenience of cash”
In the post, she made mention of the fact that through the blockchain technology which underpins cryptocurrencies, some payments services are able to make international fund transfers within hours instead of days.
Christine Lagarde also talked about the possible and potential balance in the financial landscape which will be due to the wider use and adoption of cryptocurrencies. She is however of the opinion that the new era of digital currencies will not necessarily replace financial institutions and intermediaries but might instead modify how their businesses are run. “The fintech revolution will not eliminate the need for trusted intermediaries, such as brokers and bankers,” she intimated:
“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.”
Cryptocurrencies do not pose any danger & Banks and Financial institutions operation models will face challenges…
On financial stability, Ms. Lagarde said, “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.”
She however said there is the need for regulators to remain vigilant and take a close look at the space and constantly study it for proper understanding.
On banking and financing models she says;
“Moreover, banks and other financial institutions will face challenges to their business models, should there be a large-scale shift from government-issued currencies towards crypto-assets. Regulators might find it harder to ensure stability of a more diffuse and decentralized financial system. Central banks might have more trouble acting as lender of last resort in case of crisis.”