Cryptocurrencies are growing on IMF Chief Christine Lagarde.
The bitcoin price is trading in the green again today and oddly enough may be getting some of its lift from some positive remarks from Lagarde, who is at the helm of the International Monetary Fund (IMF). Her message to the world is that “crypto-assets do not pose an immediate danger,” something market participants have been saying all along.
Lagarde in her latest blog post explores the promise that cryptocurrencies have to offer, a sanguine view that reflects a shift in the tone of regulatory agencies. Lagarde is calling for a “balanced approach” to cryptocurrencies, one that neither pulls the rug out from the market nor suggests jumping in with both feet.
For instance, she pointed to the risks of leveraged trading where investors can pile on debt and the possibility for cryptocurrencies to pose a systemic risk to the economy at some point. But mostly, her message was cheery.
“Here, I want to examine the promise they offer. A judicious look at crypto-assets should lead us to neither crypto-condemnation nor crypto-euphoria,” said Lagarde.
It’s a very even-keeled message, at times sounding like a seasoned blockchain developer who is not sticking their head in the sand about the risks but also can’t deny the role that cryptocurrencies will play in the future.
“Just as a few technologies that emerged from the dot-com era have transformed our lives, the crypto-assets that survive could have a significant impact on how we save, invest and pay our bills. That is why policymakers should keep an open mind and work toward an even-handed regulatory framework that minimizes risks while allowing the creative process to bear fruit,” said Lagarde.
Lagarde has increasingly become more accepting of bitcoin over the years, evolving from reassuring banks “not to worry” about blockchain and bitcoin, to associating the market with fraud and with anti-money laundering activity, to warning financial institutions that cryptocurrencies could be the great disrupter of banks.
There’s still traces of the former Lagarde, with the IMF in the blog drawing comparisons between bitcoin, Holland’s tulip mania in the 1600’s and the dot-com bubble. But compared to her recent speeches she also offers a more measured approach to the cryptocurrency market that demonstrates a sudden open-minded approach to the rise of digital currencies.
For instance, she suggests that with more than 1,600 cryptocurrencies currently available, there’s a lot of froth and many “will not survive the process of creative destruction,” which is reasonable to suggest that only the strong will survive. She also embraces the potential that cryptocurrencies have to offer, pointing to cryptos’ attractive features, chief of which she said are “speed” and being “inexpensive.”
Lagarde suggests that distributed ledger technology (DLT) could help banks to operate more efficiently, which is something that Ripple and Santander are already proving. She pointed to the benefits of smart contracts, admitting that they remove the friction in the banking system. Not skipping a beat, Lagarde acknowledged sectors of the economy like healthcare and real estate and regions like Ghana where DLT technology could bolster security.
Lagarde still sees a role for brokers and bankers in financial services but again stresses the balance that could hopefully exist between “centralized and decentralized service providers.”
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