IMF Chief, Christine Lagarde, recently warned fellow bankers to embrace Bitcoin and other digital currencies.
Christine Lagarde, head of the International Monetary Fund, recently addressed a conference in London where she highlighted the positive changes Bitcoin and other digital currencies could bring to the current financial landscape.
Lagarde also warned financial institutions not to stagnate and rather to embrace what the world of cryptocurrencies has to offer. In her speech, Lagarde stated that virtual currencies, which are created and traded without oversight from banks, could soon be embraced by countries with unstable currencies or weak domestic institutions.
Considering the attractive benefits that virtual currencies offer, especially to countries with unstable currencies, Lagarde seems to think that digital currencies will soon give traditional currencies a "run for their money." Lagarde advised central bankers that the best practice would be to continue running effective monetary policies while remaining open to new ideas and technologies as the demands of traditional currencies and economies change.
The most popular digital currency is undoubtedly bitcoin, which can easily be converted to traditional cash currencies once it is deposited into a bank account according to prices set out in online trading platforms.
Despite the recent drop in trading prices, bitcoin still remains the most popular digital currency. Since its beginning, bitcoin has been notably volatile. Bitcoin enjoyed soaring prices over the past few years but recently experienced a drop in September, when China removed all bitcoin exchanges from its market. This followed after a high-profile investment banker denounced bitcoin as being fraudulent.
Despite Lagarde’s enthusiasm over digital currencies, she thinks it unlikely that digital currency will completely eclipse traditional currencies, at least in the foreseeable future. Digital currencies are generally too volatile, risky, and energy intensive to be a plausible replacement just yet. In addition, Lagarde notes that most of the underlying technologies are not yet scalable.
Gox exchange lost over 850 000 due to hackers. Following this huge loss, Japan immediately put laws in place to regulate Bitcoin and other digital currencies. However, Lagarde argued that in the next few years technological innovation could address most of the issues that have inhibited mainstream use of digital currencies.
Lagarde likened bitcoin to laptops and tablets by saying that no long ago, many people would have thought it impossible to use laptops and tablets with such ease as we do today, the same is likely to be said of digital currencies in the future. However, many prominent bankers have spoken out against digital currencies. Most notably, JPMorgan CEO, Jamie Dimon, called bitcoin a fraud and stated that he'd readily fire any of his traders if he caught them trading a virtual currency.
In her London address, Lagarde highlighted all the changes that can be brought about by financial technology over the next few years. She also stated that machines would inevitably play a large part in the future. They can be used to help policymakers, make real-time forecasts, spot bubbles, and be instrumental to help uncover complex financial links.