An International Monetary Fund (IMF) official believes that central banks need to take severe action towards eliminating cryptocurrencies, as potential competition to fiat currency.
Several ideas for concepts came mainly from International Monetary Fund IMF’s Monetary and Capital Markets Division, in particular, the likes of Dong He. An article regarding a list was published last Thursday, May 31, 2018, where he argued that if the cryptocurrency market continues to grow, it may:
“one day reduce demand for central bank money.”
The IMF Monetary Policy in the Digital Age paper by Dong He “Crypto assets may one day reduce demand for central bank money” is quite sixteen page report about finance and future development of markets.
This is not the first time a reputable official like International Monetary Fund, made comments regarding the potential overtake of cryptocurrencies, as director, Christine Lagarde also holds the same belief. According to claims made, Lagarde suggested that regulators should take some of the technology’s specs to their advantage in order to “fight fire with fire”.
Some of He’s arguments that are worth highlighting here include his proposition that central banks should strengthen regulations to eliminate any further growth associated with crypto (legal or illegal) and they should also come up with their own digital tokens that takes on the same decentralized system, cryptos do.
More specifically, He stated 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.” He also went on to suggest that central banks can “make their money user-friendly in the digital world by issuing digital tokens of their own to supplement physical cash and bank reserves… exchanged, peer to peer in a decentralized manner, much as crypto assets are.”
While the propositions do seem strategic, the main question becomes whether or not central banks will take them into consideration. For one, regulations are something they are known for, therefore that proposition would not be concerning to them.
However, their endeavors in entering the digital currency world is doubtful. For instance, a representative of the Hong Kong Monetary Authority currently stated that they do not have any plans for a digital token – this comes after all the research done.
How will the moves made on the central banks part effect the future of cryptocurrencies?