- As the market plummets once more, IMF advises governments to consider offering their own cryptocurrencies
- Central banks already have the advantage of being trusted by most consumers
- Proposal likely to draw mixed reactions in crypto space, where opposition to central banks is rife
The International Monetary Fund (IMF) has advised governments to consider taking a leading role in the fast-growing Fintech industry by starting their own cryptocurrencies. A government-regulated system, according to the IMF president, will lock out fraudsters and money launderers and remove some risks associated with privately managed digital currencies.
Safer, faster payments
The Guardian reports that the head of the IMF Christine Lagarde was speaking at the Fintech Conference in Singapore on Wednesday, November 14, 2018, where she said it was incumbent on central banks to quickly establish cryptocurrencies for the growing networks of private financial transactions to prevent their sliding into unstable trading networks.
Lagarde said Central Banks could take advantage of their establishment and get involved in processing transactions as the private sector to create and offer innovative services to customers using the latest technologies. She stated:
“The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous. And central banks would retain a sure footing in payments. In addition, they would offer a more level playing field for competition, and a platform for innovation.”
The IMF head says while the use fiat cash affords anonymity to users, central banks should be able to use the control systems they have in place to allow cryptocurrencies to do the same. This, she said, is what will allow central banks to give crypto consumers a better assurance in the emerging financial landscape, adding that the prevalence of digital currencies is changing the role of the state in regulating money. She stated:
“Putting it another way. The central bank focuses on its comparative advantage – back-end settlement – and financial institutions and start-ups are free to focus on what they do best – client interface and innovation. This is a public-private partnership at its best.”
Lagarde said the increasing prevalence of cryptocurrencies is sparking privacy issues that need to be addressed and some challenges are yet to be overcome. She added:
“The Fintech revolution questions… coins and commercial deposits and it questions the role of the state in providing money.”
The proposal by IMF, which flies on the face of its earlier warnings about cryptocurrencies, is likely to receive mixed reactions especially by proponents who believe the entry of central banks into the technology could bring in the heavy-handedness that blockchain and cryptocurrencies are trying to escape from and eventually raise the cost of transactions. Businesses that have been waiting on the fence to see regulation in the crypto space are likely to welcome the move and the involvement of central banks as they believe it will preserve integrity in cryptoshpere.