A report published by an International Monetary Fund (IMF) official has warned central banks that they must adapt to the innovations brought forward by cryptocurrencies.
An article authored by the IMF’s Monetary and Capital Markets Department deputy director, Dong He, argues that cryptocurrencies may have a negative impact on demand for central bank-issued fiat money in the future and that central banks must be adaptive of the changing financial landscape brought about by cryptographic assets.
The article expresses that “Crypto assets may one day reduce demand for central bank money,” adding that central banks should consider implementing measures to “forestall the competitive pressure crypto assets may exert on fiat currencies” and make fiat currencies “more attractive for the digital age.”
He argues that “Central banks must maintain the public’s trust in fiat currencies and stay in the game in a digital, sharing, and decentralized service economy. They can remain relevant by providing more stable units of account than crypto assets and by making central bank money attractive as a medium of exchange in the digital economy.”
The article further adds that “government authorities should regulate the use of crypto assets to prevent regulatory arbitrage and any unfair competitive advantage crypto assets may derive from lighter regulation. That means rigorously applying measures to prevent money laundering and the financing of terrorism, strengthening consumer protection, and effectively taxing crypto transactions.”
This echoes statements by Christine Lagarde, the Director of the International Monetary Fund (IMF), who has previously warned central bankers not to ignore Bitcoin and stated that “it’s time to get serious about cryptocurrency.”
“I think that we are about to see massive disruptions,” IMF Managing Director Christine Lagarde told CNBC during an interview in October.
When Lagarde was asked whether she agreed with JPMorgan Chase CEO Jamie Dimon’s comments that Bitcoin is a “fraud,” she added it’s important to look at the broader implications of technologies like digital currencies and not to categorize them as speculation or Ponzi schemes.
“I think we should just be aware of not categorizing anything that has to do with digital currencies in those speculation, ponzi-like schemes,” she said. “It’s a lot more than that as well.”
Lagarde also spoke at the Bank of England’s conference in London last year. Where she stated cryptocurrencies like Bitcoin could give central bank-issued currencies and existing monetary policies “a run for their money.” She further called on central bankers to “be open to fresh ideas” and that it “may not be wise to dismiss virtual currencies.”
Lagarde, added she believes that cryptocurrencies like Bitcoin may give “existing currencies and monetary policy a run for their money,” and could potentially even be included in the IMF’s SDR (Special Drawing Rights) basket of currencies in the future, Coinivore reported.
Bitcoin “puts a question mark on the fractional banking model we know today.”
In its early 2016 staff paper, the IMF stated the central bank considers distributed ledgers to have the capability to revolutionize the financial sector through cost reduction and deeper financial inclusion in the long term.
Additionally last year the IMF released a report that provided a detailed analysis of cryptocurrency technology, and the potential implications that it may have for lawmakers, governments, and financial institutions who will seek to regulate the FinTech.
Earlier this year a JPMorgan Annual report for the year 2017 revealed that the big U.S. bank is scared of cryptocurrency disrupting their business model, Coinivore reported.
Bitcoin is currently trading at [FIAT: $7,719.59] +1.41% according to Coin Market Cap at the time of this report.
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