"Crypto should not be dismissed" says IMF chief

10 Nov, 2018
by Will Heasman
News
Crypto should not be dismissed says IMF chief

A monthly bulletin from The Official Monetary and Financial Institutions Forum (OMFIF) includes an article written by the chief of the International Monetary Fund (IMF) - Christine Lagarde - on the relevance of crypto and its place in society.

Entitled “A Regulatory Approach to Fintech: Guarding Against Emerging Risks Without Stifling Innovation,” the article is a deep dive into the good bad and the ugly of crypto, but ultimately offers some very positive sentiment.

Lagarde anecdotally equates the emergence of the cryptocurrency industry with that of the invention of the telephone, stating that the latter was all but dismissed by proponents of the telegraph - the leading communication technology at the time:

“Today, some enthusiasts say crypto-assets may represent the beginning of a similar breakthrough. Others condemn crypto-assets as little more than a fad or a fraud. We should not dismiss them so lightly.”.

On the topic of regulation, Lagarde admits the task is a difficult one, with global regulators facing a trade-off between protecting customers, investors, and financial stability, and fostering a new, innovative financial technology: 

“By engaging with market participants at the centre of financial innovation, regulators can stay abreast of the benefits of new technologies and identify risk. Developing a forward-looking regulatory framework calls for creativity, flexibility, and new expertise”.

Lagarde also adds the caveat that a global approach to regulation is needed in order to avoid crypto firms migrating to less stringently regulated areas of the world.

To this end, Lagarde suggests a regulatory sandbox, such as the ones emerging in Abu Dhabi and Hong Kong: 

“we should not put off action until the answers become clear. Instead, we must begin to consider the regulatory framework of the future. One approach, undertaken in Hong Kong, Abu Dhabi and elsewhere, is to establish regulatory sandboxes where new financial technologies can be tested in a closely supervised environment.”.

In closing Largarde manages to strike an equilibrium between cautiousness and optimism, stressing that open-mindedness is key to the proper evaluation of this nascent industry:

“Above all, we must keep an open mind about crypto-assets and fintech, not only because of the risks they pose but also because of their potential to improve our lives. When in doubt, think of Bell and his telephone.”.

The IMF acts as quasi-regulators of the global economy, with a significant amount of clout with the worlds financial institutions; this article goes to show just how seriously the crypto space is being taken by the firmly entrenched (and often stubborn) financial institutions of the world.

Read more: IMF Official: Central Banks Need to Compete With Crypto; IMF magazine releases article on crypto; IMF: Cryptocurrency will not impact upon financial stability… Yet

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