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3 weeks ago

Cryptocurrency Shaking the system, IMF director says.

 

The International Monetary Fund is the organization that exists to facilitate international trade, enable financial stability, nurture global monetary cooperation reduce poverty amongst other things. The organization decided to speak on the undeniable eye candy that is cryptocurrency.

 

The Managing Director of International Monetary Fund (IMF), Christine Lagarde, has directly outed that crypto and other ‘disruptors’ are shaking the requisite financial industry’s a system, which may have conjunct effects. Lagarde subtly reprimands regulators and reinstates that they will be held accountable whatever decisions they make going forward.  She stated the need for authorities to keep an eye on these technologies which are disruptive so stability will remain in the global banking system. She, in turn, spoke regarding blockchain technology and possibly users of their technology. She said:

 “Regulators are mindful of where the competition is coming from. The Central Bank of Kenya Governor was explaining to us they gave a banking license to a telecom company. In future, we have to look at what lots of data collectors and movers are going to do and whether they are going to move into the banking space forcefully, in which case they will have to be regulated, they will have to be held accountable so they can be trusted.”

 “We have to be mindful of two things; trust and stability of the system. At IMF, we don’t want innovation that would shake the system so much that we would lose the stability that is needed.”

 Financial institutions are regulated by the IMF; inherently regulation falls upon financially unrelated companies delving into the use of this technology.

                                               

Lagarde also made the comments while speaking at the IMF Spring Meetings in Washington, DC, on Wednesday. Following a panel session, Lagarde had this to say in an interview with CNBC about the evolution of money systems around the world: 

“Clearly the disruptors are having an impact on the incumbents. We just heard a very large systemic bank saying that they are launching a digital coin currently piloted within their institutional clients but to be scaled beyond that. The role of the disruptors and anything that is using distributed ledger technology whether you call it crypto, assets, currencies, or whatever is clearly shaking the system.”

 Lagarde mentioned an example of a disruptor revealing that the European Central Bank (ECB) in November launched a new service, like Ripple, called Target Instant Payment Settlement (TIPS), which allows banks in the eurozone to make instant payment transfers at “virtually no cost.”

 

 The IMF director, who was also a former French finance minister, prior to now expressed that she is open to the raving technology. She told central banks to think about using distributed ledgers last November in a speech at the Singapore Fintech Festival. In direct quotes, she said “I believe we should consider the possibility to issue digital currency,” She drew attention to central banks moving in that direction already. An instance is Sweden’s Riksbank says it is considering a digital currency—which is likely not a cryptocurrency. Its value would be backed by the government. This meeting point for the traditional financial sector and regulatory body could be progressive.

 

The matter of how regulators feel about cryptocurrency, since big tech companies are moving into the finance sector, was not left out. The director responded that regulators are only interested in system stability and compliance with the regulation. This paints a good picture that the IMF is all out for the good of the system. In the loop of the big names in technology already making a series of incursions into blockchain space;

 

  • Banking giant JP Morgan recently launched its own cryptocurrency, JPM Coin, for settlements with its institutional clients.

 

  • Japan has a cash-dependent consumer society; Mitsubishi UFJ a Japanese banking conglomerate unveiled its new cryptocurrency experiment designed to effectively replace physical cash in Japan.

 

  • Apple recently partnered with Goldman Sachs and Mastercard to offer its own credit card.

 

  • Facebook reportedly has a cryptocurrency in the works; Sources say it aims to raise $1 billion to start its own cryptocurrency for use on Whatsapp.

 

The IMF director may have seemed all out to lash blockchain technology but contrary to that impression Lagarde also paid a compliment to blockchain technology. From her words, ‘it has the capacity to do a lot of good for the financial sector, but regulators need to keep an eye on it to prevent any breach of trust or system instability in the banking sector.’

This is an utterly refreshing perspective to things and the Director’s comments should really only be an eye-opener and an important guide to concerned parties.

 

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Credits - Christine Masters, PYMNTS, CryptoDavid, Priyanka Saxena, Benedict George, Wikepedia.

 

 

Anita O.

Lover of tech and blockchain.

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