Ms. Lagard cited cryptocurrencies’ absence of clearing delays, low transaction fees for small value payments, ease of peer-to-peer and cross border transactions as advantages in the burgoeoning shared, decentralized service economy. As such, Largard foresees a day when citizens might prefer virtual currencies over fiat currencies as easier and safer alternative to paper bills.
She gave the example whereby small countries with weak institutions and unstable national currencies may adopt cryptocurrencies over their own currencies, much in the way citizens of the Seychelles adopted U.S. Dollars instead of their own currency.
Lagarde: Don’t Diss Bitcoin
Regarding Bitcoin, Ms. Lagard noted Bitcoin currently poses no threat to fiat and central banks because it’s “too volatile, too risky, too energy intensive, the underlying technologies are not yet scalable,… [its] hard to regulate and has been hacked”. Lagarde noted, however that one day digital currencies become more more stable and concluded, “So I think it may not be wise to dismiss virtual currencies.” and noted further “virtual currencies might just give existing currencies and monetary policy a run for their money.”
If privately issued virtual currencies remain risky and unstable, Largarde predicted that citizens” may even call on central banks to provide digital forms of legal tender.”
In the Q/A section, Ms. Lagarde was asked if private digital currencies may make monetary policy disappear.
Ms Lagarde: I would suppose in the more immediate future it makes [central bankers’] jobs more neceesary and difficult because of that segmentations of the banking relationship and the fact that whether its digital support or whether it’s just pure segmentation of the customer relation vs. the availability of services. They have to sort of capture the whole of that segmented relationship. But, going forward who will set the price of money? and who will asses time because that is really what it boils down to. I contend that we will still need monetary policy, but the future will tell.
Ms. Largade’s positive comments about cryptocurrencies were in stark contrast to JP Morgan Head Jamie Dimon’s recent comments about Bitcoin, which he referred to as a “fraud”.
This has led some to speculate that Bitcoin could be added to the SDR in the future.
The text of Ms. Large’s remarks:
But the Fund will also have to be open to change, from bringing new parties to the table, to considering a role for a digital version of the SDR.
Deviation from the text:
“The SDR, invented a few decades ago, might have a future interesting life if we include a digital dimension and some new technologies to it. Particulary, at a time when a threat to existing networds are in the air.”
In the Q/A session after Ms. Largard’s speech she was asked:
In the original vision of Keynes and Bretton Woods, they thought the SDR would play a much bigger role in the international monetary system, do you think the digital age creates an opportunity to rethink the role of the SDR as an international currency?
Lagarde: It has been around for a long time, there hade been high expectations… There was a pick up after the Remnimbi was included in the basket of currencies. Has it been a massive pick up? No! I think that the digital platform and the distributed ledger technologies can actually facilitate something that would otherwise be something of a political nature. I think if the two were to come together, the digital acceleration and facilitation and the geo political situation that would be propitious to relying on an alternative basket of currencies that would not be a substitute for existing international currencies. We would need the two together. It’s not a far fetched hypothetical, and I believe at the Fund we have to be ready for that should the circumstances arise that would facilitate the whole process.
Ms. Lagarde’s Speech Concludes with a Warning to Globalists
Ms. Lagarde also ad libbed at the end of her speech: “Yes, I could have talked to you about cyber security and the challenges of hacking and the financing of terrorism and the hiding places that are made available. But I believe that we as individuals and communities have the capacity to shape the technological and economic future that works for all.
She then added a contrite note:
“I’d like to pause for a second here. We go around beating our chest reminding ourselves when globalization was up and rising and the story of the day, we forgot a little bit about the fact that it had to benefit all. Let’s try not to make that same mistake again. As difficult as it is and as jargonic as it sounds, as technical as it certainly is, let us make sure that these new technologies and the ways that they disrupt and transform will actually work for all and not just for a few. Failing which, in 2050 we might be very sorry that we have not reminded ourselves of that imperative.
Listen to Ms. Large’s speech:
Will the IMF put the SDR on a digital platform?
Will the IMF add digital assets, like Bitcoin to the SDR?
What did Christine Lagarde mean by her closing comments?
Is there room for Bitcoin or other cryptocurrencies in the SDR?
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