IMF’s Annual Report Says Digital Currencies do Not Threaten Economies
Benjamin Roussey
Benjamin Roussey is from Sacramento, CA. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship and he completed 4 years in the US Navy. He has an MBA in Global Management from the Univ. of Phoenix (2006). He has worked everywhere from small businesses to large corporations, and also for public agencies. He has lived in South Korea and Saudi Arabia where he was an ESL instructor. Benjamin has a tremendous work ethic and is quite focused. Now he writes professionally for several clients that cover one sector of our economy to another. Currently he lives in the Phoenix area. He enjoys sports, movies, reading, and current events when he is not working online.
Contrary to the general prevailing apprehensions regarding cryptocurrency, the International Monetary Fund (IMF) appears to be positive in its perspective. The IMF (and this has nothing to do the fictional Impossible Missions Force in those outstanding Mission Impossible movies; though the second one was not that good) does not believe that cryptocurrency is out to destabilize the global economy in any way (at least not in the foreseeable future).
There is an annual report published every year by IMF which provides a detailed outlook on global economy. This year’s report called ‘A Bumpy Ride Ahead’ has a whole chapter dedicated to cryptocurrency, its impact and global standing.
Marginal Market Impact
The market value held by cryptocurrency together is quite insignificant when compared to regular currency stock. Even after the spectacular rise in the market price of crypto-assets over the past year, their aggregate value turned out to be just about three percent of the total assets held by four largest banks. When cryptocurrency was at its absolute peak, the figure was still only about six percent.
The IMF report also stated that even though there are over 180 cryptocurrency networks in the market on a global level, more than 80% of trading is handled by the top 14. Bitcoin, Ethereum, and Ripple networks have the highest cryptocurrency trading share.
In a rather surprising statement, IMF concluded that the FANG stocks [Facebook, Amazon, Netflix (House of Cards is incredible – we know the Underwoods are the Clintons too), Google] have increased the wealth of investors more in comparison to cryptocurrency. In other words, a person who invested in FANG stocks would have enjoyed better returns than a person who invested in crypto over a period of time.
IMF has assured that cryptocurrency does not pose an immediate threat to economies of the world; however, as with anything related with public finance, it says that the sector should be regulated.
The IMF report mentioned the willingness of IMF to advise and provide ideas with regard to the regulation of crypto-assets.
Positive Future of Blockchain
Blockchain or Distributed Ledger Technology (DLT) is the technology used in all major crypto-assets. The future of blockchain technology is bright and vast, according to the IMF. As per the report, the uses and applications of Blockchain are myriad and can help create a more efficient economic infrastructure. They help drain the swamp in other words.
IMF Chief Stresses the Benefits of Cryptocurrencies
Christine Lagarde, Managing Director of IMF, highlighted the advantages of cryptocurrency in one of her commentaries she recently posted on the official website of IMF. According to Lagarde, crypto-assets are fast shaping the public thinking about currency and finance management.
She stated that the global methods of saving money, paying bills, and making investments will be considerably influenced by cryptocurrency in the near future; which is again a solid reason for an increased regulatory framework (despite America’s economy growing well because regulations are being cut but this is another topic).
She noted that most crypto-assets will perish in the course of creative destruction, while only the top performers will dominate the future of cryptocurrency.
Here are some other key benefits of digital currencies that the IMF chief postulated:
Fast and Cost-Efficient Financial Transactions
Lagarde stated that the benefits of cryptocurrencies range from providing a more flexible currency exchange platform to enabling faster and more cost intensive financial transactions.
Overseas money transfers which would take up to days can be completed in a fraction of that time. She also remarked that public banks might soon have to come up with digital currencies of their own, if they continue to believe that private crypto assets are risky.
Better Balance in Financial World with Cryptocurrencies
The IMF chief felt that with an increase in decentralized applications due to an advent of cryptocurrency, the financial infrastructure will undergo major diversifications. However, there will be better stability and balance between centralized and decentralized service providers making the market more flexible and adaptive towards any changes.
No Immediate Threat to Financial Stability
Cryptocurrency poses no threat to the global financial stability as per Christine Lagarde. However, she stated that banks and other financial institutions might face challenges and have their work cut out for them if crypto-assets became a preference over government issued currency in the future.
In such a scenario, central banks and regulators will have to come up with more effective ways to manage global finance and put sufficient safeguards in place for the stable functioning of economies.
