IMF Head Foresees the End of Banking and the Triumph of Cryptocurrency
Bitcoin "puts a question mark on the fractional banking model we know today."
In a remarkably frank talk at a Bank of England conference, the Managing Director of the International Monetary Fund has speculated that Bitcoin and cryptocurrency have as much of a future as the Internet itself. It could displace central banks, conventional banking, and challenge the monopoly of national monies.
Christine Lagarde–a Paris native who has held her position at the IMF since 2011–says the only substantial problems with existing cryptocurrency are fixable over time.
In the long run, the technology itself can replace national monies, conventional financial intermediation, and even "puts a question mark on the fractional banking model we know today."
In a lecture that chastised her colleagues for failing to embrace the future, she warned that "Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies."
Here are the relevant parts of her paper:
Let us start with virtual currencies. To be clear, this is not about digital payments in existing currencies—through Paypal and other “e-money” providers such as Alipay in China, or M-Pesa in Kenya.
Virtual currencies are in a different category, because they provide their own unit of account and payment systems. These systems allow for peer-to-peer transactions without central clearinghouses, without central banks.
For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.
But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.
Better value for money?
For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country—such as the U.S. dollar—some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0.
...MOREIMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008....
And from the crypto-fascists at CNBC (kidding), October 13:
'We are about to see massive disruptions': IMF's Lagarde says it's time to get serious about digital currency
- "I think that we are about to see massive disruptions," IMF Managing Director Christine Lagarde told CNBC about developments in financial technologies
- Lagarde didn't rule out that the IMF could at some point develop its own cryptocurrency
It's time for the world's central banks and regulators to get serious about digital currencies, according to the head of the International Monetary Fund....MORE
Global financial institutions are taking risks by not watching and understanding emerging financial tech products that are already starting to shake up the financial services and global payments system, according to IMF Managing Director Christine Lagarde.
"I think that we are about to see massive disruptions," Lagarde told CNBC in a Facebook Live interview on the sidelines of the IMF Annual Meetings in Washington D.C.
Asked whether she agreed with JPMorgan Chase CEO Jamie Dimon's comments that bitcoin is a "fraud," Lagarde said it's important to look at the broader implications of technologies like digital currencies.
"I think we should just be aware of not categorizing anything that has to do with digital currencies in those speculation, ponzi-like schemes," she said. "It's a lot more than that as well."
Lagarde didn't rule out that the IMF could at some point develop its own cryptocurrency. She pointed to the IMF's Special Drawing Right (SDR), a currency the IMF created to serve as an international reserve asset, that could incorporate technology similar to cryptocurrencies..
As soon as I typed 'crypto-fascist' I realized the term now has more than one meaning.
Plus CNBC may lean a bit left, who knows?
(But without going so far left they circle back around and meet Mussolini at the train station.)
Time to go home, methinks.