Dong He, deputy director of the Monetary and Capital Markets Department of the International Monetary Fund (IMF) recently released a report entitled “Monetary Policy in the Digital Era” which briefly highlights the impact of cryptocurrencies on global money markets.
Crypto-currencies will be widely adopted
The IMF has a lot to say about virtual currencies and especially about their disruptive nature. Dong He was the last representative of the organization to discuss the prevailing competition within the industry. He suggested in a recently published paper that central banks create new fiduciary currencies and more advanced monetary policies in order to better compete with cryptocurrencies.
“To avoid the potential competitive pressures of cryptomoney, central banks must continue to pursue effective monetary policies. They can also learn about the properties of crypto-currencies and the underlying technology and make fiduciary currencies more attractive for the digital age. “
Bitcoin poses a major challenge
“Cryptocurrencies offer many advantages,” says the official, “which justifies the fears of traditional financial institutions. These benefits could well create a favorable position for virtual currencies within the rapidly developing global economy. “
“As a medium of exchange, cryptocurrencies have certain advantages. These properties make them particularly attractive for micro-payments in the new digital economy based on sharing and services, “reads Dong He’s report.
As a result, the IMF considers Bitcoin and altcoins a major challenge for central banks in monetary policy. They can “one day reduce demand for central bank currencies. “
Speculation about the obsolete potential of traditional financial institutions emerged before the launch of the first cryptocurrency (Bitcoin). Since the creation of the internet, questions about the usefulness of central banks have circulated. Although the situation is still far from reaching this point, Christine Lagarde The director of the IMF had already explained that cryptocurrencies are the main causes of “massive disruption. “
The recent IMF report emphasizes the significance of crypto-currencies. They could be used as an alternative means of payment, leading directly to a significant decline in the demand for fiduciary money.
“Although to this day digital currencies are too volatile to pose a threat to fiduciary currencies, as adoption increases, volatility fades . With the introduction of better rules – intelligent rules based on artificial intelligence – their evaluation could become more stable. They have a bad reputation because of media hype about fraud , money laundering risks, security breaches and operational failures. In addition, the world population does not yet have the confidence to adopt global crypto-currencies. “
“For their part, central banks should rise to the challenge and seize the opportunities of the digital age to regain public trust and remain relevant,” says Dong He.
“They can remain relevant by providing more stable units of account than cryptocurrencies and making the money from the central bank attractive,” the IMF paper concludes.
— IMF (@IMFNews) June 1, 2018
What do you think of the IMF report? In what way would this organization be useful to the cryptocurrency industry? Let us know in the comments below.