IMF Chief Urges Financial Institutions To Keep Updated With Cryptocurrencies
According to a blog post by the IMF chief, authorities around the world have been muddled about the standing of “real threats” and “needless fears” in the crypto-world. In a bid to rule this out, the International Monetary Fund is looking to be an enabler in changing this mindset.
Managing Director of IMF, Christine Lagarde, said that in order to decrease the risk factor while ensuring the process bears fruit, policymakers should work in unison, and with an open mind to construct a regulatory framework.
Regulations Highly Needed
On April 11, during an interview with the South China Morning Post, Lagarde said that they are looking at “something which is developing fast, and which is highly volatile, with benefits and downsides.”
Lagarde set down some ground rules to eradicate fear about the crypto-world from the minds of people. She stated that firstly, unlawful use of digital currency and the misuse of the financial inexperience of consumers must be taken care of.
Secondly, the various uses and innovations that are birthed from digital mechanisms are to be given an impetus. Only then will the world come to terms with its nature. Hence, it goes to show that it’s an amalgamation of having rules that protect, and not suppress innovation, which will ultimately lead to cost reduction:
“Firstly, the illicit use of digital currency plus abuse of consumers’ financial illiteracy must be guarded against. Secondly, innovations from the use of digital mechanisms need to be explored and encouraged. So it’s a combination of having a framework that protects, and not stifling innovation, that can lead to cost efficiency.”
Digital Currencies Not a Risk To Financial System
The digital currencies that exist have a small footprint and hence, are not a danger to the worldwide financial system. Although they have a few links to the traditional financial system, their potential to amplify the risks and spike the transmission of economic shocks is high.
Lagarde announced that people must remain alert and on their toes and that they must not waste time to rule out all the loopholes that restrict cryptoassets to be monitored efficiently. It is imperative for measures to be taken to safeguard consumers, investors, and the overall market righteousness. Along with this, features such as systematic risk assessment and timely policy responses must be looked into.
According to her, the 189 economies that are members of IMF, are in the position of playing a prime role in the development of a steady regulatory approach by acting as a forum and giving precious advice.
Comments A Boon For Misunderstood Crypto-Market
As we are aware, digital money is capable of being traded without the supervision of any central monetary authority, and the comments made by Lagarde have come at a time when the financial regulators of the world are sparring to figure the most optimal way to handle digital currency.
With an estimated valuation of over $300 billion, there are around 1,500 cryptocurrencies currently circulated globally; as per data on Coinmarketcap.
This accounts for a staggering 4.8 percent of the world’s foreign exchange reserves – a sum more significant than Singapore’s reserves. As stated by Trading Economics, they are the twelfth largest in the world, referring to Singapore’s reserves that are priced at about $282 billion!
Bitcoin is allowed as a mode of transaction in Japan, which is also home to multiple large-scale crypto exchanges, and is named as one of the most crypto-friendly countries. The world’s first institute of research is set up by The People’s Bank of China, to study in depth about digital currencies.
Here’s hoping that cryptocurrency is finally given a chance and that, it gets to prove its gradual sustenance in the market!