The IMF managing director believes virtual currencies might just give existing tender and monetary policy a run for their money.
Speaking to an audience of central bankers at the Bank of England, the International Monetary Fund's (IMF) Christine Lagard extolled the virtues of virtual currencies as an alternative to traditional currency.
While acknowledging that the virtual offerings such as Bitcoin currently pose little or no challenge to the existing order of fiat currencies and central banks, the IMF chief considers the underlying volatility and riskiness of cryptocurrencies as technological challenges to be addressed over time.
Do Not Dismiss
«Citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash, no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities," Lagarde said.
Unlike the J.P. Morgan CEO Jamie Dimon who recently called all cryptocurrencies «frauds», Lagarde took a more inclusive view during her speech. «Not so long ago, some experts argued that personal computers would never be adopted So I think it may not be wise to dismiss virtual currencies,» she added.
U.S. Dollar Swipe?
Lagarde also said that in countries with weak institutions and unstable national currencies it may be preferable to move to a digital currency rather than adopting the currency of another country such as the U.S. dollar.
Probing further into the world of digital banking, Lagard addressed the possible break-up or unbundling of banking services and the implication of such a shift in regulatory practices.
Real Crackdown
Regulators across the Asia-Pacific have in the past few weeks cracked down on virtual currencies. The People's Bank of China announced an immediate ban on initial coin offerings and declared them illegal and a threat to financial stability.
Other regional regulators also followed suit with Hong Kong, Australia and Korea seeking to limit initial coin offerings. Japan however is seeking to embrace the cryptocurrencies through more legislation and licensing with the financial regulator.
