Cryptoassets have the potential to make the finance system safer, says IMF boss

25 Oct 2018

cryptocurrenciesChristine Langarde, managing director of IMF (International Monetary Fund), believes revisiting cryptoassets could “harness gains and avoid pitfalls”.

The advancement of cryptoassets has the potential to make global financial systems safer in time, despite the general judgment that an “inevitable” accident is waiting to happen.

Christine Langarde thinks cryptoassets “could have a significant impact on how we save, invest and pay our bills, but policy makers need to keep an open mind and work towards an even-handed regulatory framework that minimizes risk while allowing the creative process to bear fruit.”

Speaking at the Bank of England´s conference back in September 2017, she spoke of a world “where firms were using digital currencies and could co-exist alongside traditional banks”. That level of diversity could build a “financial ecosystem that is more efficient and potentially more robust in resisting threats.” She said as increasing numbers of consumers have caught the Crypto Bug, many more are using crypto currencies as an alternative way of holding and moving money and prefer them to traditional banks. There is still a problem with a small number of crypto exchanges being hacked, thus why there is still such a volatile market in the currencies.

Christine does however believe that before crypto-assets can transform financial activity in a meaningful and lasting way, they must first earn the confidence and support of consumers and authorities. An important initial step will be to reach a consensus within the global regulatory community on the role cryptoassets should play. Cryptoassets currently have no boundaries, therefore international cooperation is essential.

The governor of the Bank of England, Mark Carney, has openly called crypto “inherently risky” and said they had failed to fulfil their most basic function as money.

Ahead of the IMF global financial stability report, which looks at emerging risks from the world of banking, Christine said there was merit to gain from looking at cryptoassets. She noted that for this to happen, we must keep abreast of rapid development in markets and technologies. “We must act quickly to close the knowledge gaps that inhibit the effective monitoring of cryptoassets. There should be systemic risk assessment and timely policy responses, as well as measures to protect consumers, investors, and market integrity.”

Comparing recent developments to the advances of the 1990s (when thousands of technology companies were started only to collapse a few years later during the dot-com crash) she remarked many crypto-assets were bound to fail. More than 1,600 digital currencies are in circulation, having ballooned in number in recent years.

However, just as a few technologies that emerged during the dot-com era have since transformed the world, she said crypto-assets that survive this process of “creative destruction” could have a significant impact on how “we save, invest and pay our bills”.

If you are interested in cryptocurrencies or it is something you want to know more about, why not download our crypto app today: