The cryptocurrency community received surprising, if positive, remarks from the head of the International Monetary Fund, Christine Lagarde, who outlined the benefits of crypto assets and the underlying distributed ledger technology.
In her latest blog post, the IMF chief called for an open-minded and even-handed approach in devising a regulatory framework for crypto assets, saying there is a need to “harness the gains and avoid the pitfalls of the new crypto-assets landscape”.
“Crypto-assets enable fast and inexpensive financial transactions, while offering some of the convenience of cash,” Lagarde wrote.
She praised the underlying technology of crypto assets, distributed ledger technology (DLT), noting that it could help financial markets function more efficiently.
Self-executing and self-enforcing smart contracts “could eliminate the need for some intermediaries”, she said.
Healthcare companies, for example, could maintain confidential medical data via DLT, which enables secure storage of important records.
The extremely high volatility and uncertainty in crypto assets, coupled with the speculative mania, have raised concerns from authorities and regulators worldwide.
Lagarde said crypto-assets do not pose an immediate danger, but she believes they have the potential to “increase the transmission of economic shocks” when they move closer to the mainstream.
The IMF chief called for “an even-handed regulatory agenda” and “a clear-eyed approach” when dealing with crypto assets.
“An important initial step will be to reach a consensus within the global regulatory community on the role crypto-assets should play,” she said. “Because crypto-assets know no boundaries, international cooperation will be essential.”
Lagarde stressed IMF’s role in offering advice and serving as a forum for discussion and collaboration in the development of a consistent regulatory approach.
Looking forward, she said “there may be demand for central banks to provide digital forms of money” if crypto assets remain risky and unstable.
While citing the benefits of cryptocurrency, Lagarde predicted that a market collapse, or reshuffle, is inevitable. “With more than 1,600 crypto-assets in circulation, it seems inevitable that many will not survive the process of creative destruction,” she said.
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