Governments all around the world need to take the monitoring of cryptocurrencies and the distributed ledger technology more seriously to prevent the occurrence of an instability in the global banking system.
Are Digital Assets Causing More Harm Than Good?
This request was put forward by the Managing Director of the IMF, Christine Lagarde, who blames the unbalance witnessed in the banking system on disruptive financial technologies like cryptocurrencies and maintains that such must be closely monitored.
In her words: “I think the role of the disruptors and anything that is using distributed ledger technology, whether you call it crypto, assets, currencies, or whatever … that is clearly shaking the system.”
Lagarde believes that these financial industry changes must be regulated so that trust and stability within the industry will not be broken.
“We don’t want innovation that would shake the system so much that we would lose the stability that is needed,” she stated.
No Special Treatment for Technology Companies
On the same regulatory issue, Lagarde pointed out that technology companies are beginning to venture into the banking space but notwithstanding, they must submit to regulation as well, a statement that captures the recent financial moves made by Apple. Apple has partnered with Goldman Sachs to release its own physical and virtual credit card.
“They will have to be held accountable so that they can be fully trusted,” she said.
Analysts have been able to establish that the multitrillion-dollar market of the banking sector is increasingly becoming more attractive to tech firms who believe that it is time for the industry to undergo a technological disruption. In other news, Facebook is working towards creating its own cryptocurrency, as if the existing cryptocurrencies are not enough sources of concern.
Banks Are Becoming More Receptive Of Cryptocurrencies
Banks have made efforts to become friendlier towards cryptocurrencies. For instance, JPMorgan Chase is developing a digital token named “JPM Coin” that will facilitate faster payment settlements between clients. Also, Goldman Sachs is making moves of expansion for its digital retail bank that goes by the name Marcus overseas.
The comments from Lagarde are not entirely new as she made similar comments in November 2018 in Singapore. As at then, she called for a “central bank for digital currencies” which would make digital currencies a liability of the state rather than a private firm.
She revealed that several central banks around the globe are seriously taking into account these ideas. They include the following: Uruguay, China, Canada and Sweden.
“They are embracing change and new thinking — as indeed is the IMF,” she said.