Christine Lagarde, the head of the International Monetary Fund (IMF) has declared that Bitcoin and other cryptocurrencies could safeguard the global financial system. According to the IMF boss, the prospects of inevitable accidents aside, revisiting cryptocurrencies could benefit the mainstream financial market by harnessing gains and avoiding pitfalls. These statements come as politicians and bankers from all over the world have converged on Washington DC for the 2018 Spring Meeting of the IMF and the World Bank.
Writing in a blog post on the IMF website, Lagarde envisioned a time when cryptocurrency firms could coexist with mainstream financial institutions. According to her, such a level of diversity had the potential to create a robust financial ecosystem that was immune to threats. She also went on to say that blockchain and distributed ledger technology, the building blocks of the cryptosystem could revolutionize the global financial industry. She stated her belief that the emerging technology could make could improve the speed, cost-effectiveness, and security of financial transactions. She also drew attention to what she called “real threats and needless fears”, referring to the untapped potential of the system and the reticence of the mainstream sector to invest in the technology.
In a more sanguine view of cryptocurrencies than has been her position in the past, Christine Lagarde called for “balanced approach” to cryptocurrency regulations. Many countries choose to either adopt the ambivalent “wait and see” approach or crack down hard on the crypto market. Only a few countries like Japan seem to be actively trying to find a middle ground that allows cryptos to flourish in the foreground while not compromising on security concerns in the background.
Drawing comparisons with the dot-com era that saw the emergence of internet companies, many of which didn’t last long, Lagarde believes that many of the crypto species in existence won’t stand the test of time. however, the ones that do will shape the definition of money the way the internet companies of the dot-com era shaped the definition of commerce. For this reason, the IMF head believes it is in the best interest of governments, central banks, and other financial stakeholders to not cast a jaundiced glance at the cryptocurrency market. She encourages everyone to work towards an even-handed regulatory framework that will reduce the risks and allow cryptos to bear fruit.
Christine Lagarde has had more than a few things to say about cryptocurrencies over the years. She has in the past, compared Bitcoin with the Tulipmania of 17th century Holland and the dot-com bubble of the 90s and 2000s. She once told banks not to worry about Bitcoin and blockchain technology then changed her stance by telling financial institutions that cryptocurrencies had the potential to be a disrupter of banks. She has also raised alarms over the possibility of cryptos being used for money laundering, terrorist financing, and other illegal financial activities. These latest remarks of hers with respect to crypto regulations are at odds with her comments in March when she called for a crackdown on cryptos by “fighting fire with fire”.