Christine Lagarde, the chief of the International Money Fund, has recently stressed the importance of cryptocurrency at a conference held in London. Stating that virtual currencies should not be dismissed outright by governmental structures around the world, Lagarde has claimed that digital currencies are positioned to provide conventional government-issued fiat currencies a “run for their money”.
At the London-based event, Lagarde explained that there are a number of countries, specifically those with “weak institutions and unstable national currencies” could potentially adopt a national cryptocurrency.
“Instead of adopting the currency of another country – such as the US dollar – some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0. So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy while being open to fresh ideas and new demands, as economies evolve.”
The Benefits Of Digital Currencies
During a series of statements regarding the potential impact blockchain technology could have on the global economy, Lagarde cited a number of factors that may speed up the rate at which digital currencies are adopted. Amongst these reasons is the possibility of a shift in consumer preference for new, streamlined currencies that are “safer” and “easier” than traditional fiat solutions.
These properties are likely to become more prominent as the cryptocurrency market stabilizes. In her statements, however, Lagarde clarified her perspective on the prospect of cryptocurrencies overtaking fiat currencies, explaining that the eventuality of fiat redundancy is a distant prospect.
According to Lagarde, this is due to the fact that virtual currencies are currently “too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable”.
The IMF’s Position On Cryptocurrencies
The IMF has, and continues to, promote a balanced approach to the hotly-contested issue of cryptocurrency and digital currency regulation. As delineated in a staff paper released in 2016, the IMF considers distributed ledgers to have the potential ability to revolutionize the financial sector by delivering cost reduction and overall deeper financial inclusion over the long term.