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IMF: Crypto-Assets Need an Even-Handed Regulatory Agenda

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Christine Lagarde, the Managing Director of the International Monetary Fund (IMF), has published a post on the importance of approaching crypto-assets in a way that reduces risks but promotes innovation. She explains that harsh criticism or blind support is not the correct way to deal with the topic. Out of the cryptocurrencies available today, only a few will survive the financial journey. And the ones that do, “could have a significant impact on how we save, invest and pay our bills”.

Lagarde explains the use-cases of cryptocurrencies: fast and cheap transactions, smart contracts that require no third parties, permanent and secure records, property rights or investments. From the health industry to the real estate industry, blockchain technology and cryptocurrencies have paved way for transparency and security. However, Lagarde doesn’t want what other crypto investors would like to see in the future: complete decentralization.

There is hope, however, that decentralized applications spurred by crypto-assets will lead to a diversification of the financial landscape, a better balance between centralized and de-centralized service providers, and a financial ecosystem that is more efficient and potentially more robust in resisting threats.

Lagarde also points out that if majority of the world suddenly decides to trade in cryptocurrencies or discard dollars for Bitcoins, the result will send shockwaves throughout financial institutions.

[R]egulators should remain vigilant: crypto-assets have the potential to magnify the risks of highly leveraged trading, and to increase the transmission of economic shocks should they become more integrated into mainstream financial products … Regulators might find it harder to ensure the stability of a more diffuse and decentralized financial system. Central banks might have more trouble acting as the lender of last resort in case of a crisis.

Therefore, in order to maintain a perfect balance, both crypto-assets and regulatory authorities have to play their part. Furthermore, people need to learn more about cryptocurrencies, ICO tokens and blockchain technology to “close the knowledge gap”. Lagarde offers IMF as the place where people can discuss the current situation and take advice to develop a proper set of rules and regulations.

The Telegraph reported that Lagarde’s positive post on crypto-assets may have raised Bitcoin’s price. It is interesting to note that, at the time of writing, all of the top 10 cryptocurrencies are in the green.

Image Credit: Deposit Photos

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