Christine Lagarde, head of the International Monetary Fund (IMF), stated yesterday that cryptocurrencies like bitcoin and ethereum “could have a significant impact on how we save, invest and pay our bills.”
Lagarde said that while cryptos have some downsides, they “enable fast and inexpensive financial transactions, while offering some of the convenience of cash.”
She further says blockchain technology can make “financial markets function more efficiently.” While smart contracts might “eliminate the need for some intermediaries.”
The Managing Director of IMF goes so far as to state digital currencies and blockchain technology may “help secure property rights, increase market confidence and promote investment,” in developing countries.
The formerly French politician does appear to have gradually become more and more open to the innovation in this space, starting with a speech last year when she said cryptos “might just give existing currencies and monetary policy a run for their money.”
In October then she argued cryptos are “already massively disruptive.” While the statement yesterday appears to go further and seems to even be promoting cryptocurrencies and blockchain technology.
“Decentralized applications spurred by crypto-assets will lead to a diversification of the financial landscape, a better balance between centralized and de-centralized service providers, and a financial ecosystem that is more efficient and potentially more robust in resisting threats,” she said.
Yet the remarks appear to be aimed towards carving a role for IMF as a global regulator of sorts for this space.
“Because crypto-assets know no boundaries, international cooperation will be essential. Here, the IMF, with a membership of 189 countries, can play a key role by offering advice and serving as a forum for discussion and collaboration in the development of a consistent regulatory approach.”
We think that’s far too early. The crypto space is moving way too fast for the stupendously slow approach of national regulators, let alone a global regulator.
By the time they lay down whatever rules, they would probably be out of date, and since they would still be enforceable, they may be quite harmful to economies.
The IMF could however assist in ensuring banks cease their anti-competitive practices while otherwise allowing the experimentation in this space to continue unhampered minus of course enforcement action against obvious fraud, scams, or indeed other obviously illegal/criminal aspects.
In short, regulators and the IMF should not be a talking shop between themselves, but perform the duty of serving the public, which pays them, and thus talk with the public, in this case this space.
Something which some regulators are doing. FCA in particular has a number of notable public consultations relevant to this space. While the French FCA is engaging in a regulatory experiment of its own which may well pay off significantly.