Thursday, June 20, 2019

IMF Director: Cryptocurrency Adoption Is Shaking the Banking System; It Must Be Monitored

The International Monetary Fund (IMF) Director, Christine Lagarde said that Cryptocurrencies are shaking the banking system. She said this in a panel of discussion at the IMF Spring Meetings in Washington DC.

Crypto Shaking the Banking System

Recently, the Director of IMF, Christine Lagarde commended the technological innovation of Ripple and Circle, that it will cannibalise the banking system. Meanwhile, in contrast, in a panel discussion at the IMF Spring Meetings in Washington DC, she stated that cryptocurrency is shaking the banking system.

She noted that clear evidence of cryptocurrencies’ impact on the financial system is how commercial banks can be seen changing their business models these days. Lagarde stated that “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.”

Also, she informed CNBC that “We don’t want innovation that would shake the system so much that we would lose the stability that is needed.”

However, she is of the opinion that such “disruption” must be monitored to maintain the stability of the system, and should be accompanied by regulations. Especially because of the recent influx of institutions into the industry.

In recent time, top U.S. bank, JPMorgan chase launched its cryptocurrency, the JPM coin, with more financial institutions also planning to venture into it. Also, top tech firms in the world such as Facebook is reportedly planning to adopt its crypto, Facebook coin; Apple also plans to create its credit card and many others planning adoption. Lagarde believes all adoption must be subjected to regulations. She noted that “They will have to be held accountable so that they can be fully trusted.”

Cryptocurrency And the Banking System

According to most crypto enthusiasts, cryptocurrency is going to succeed the traditional financial system and the use of fiat. This has become a driving factor for crypto adoption by various tech firms and individuals. Like Lagarde said, cryptocurrency threatens the banking system, because it operates independently of the banking system, and it’s being adopted by the financial system.

The recent trend in countries facing acute inflation and where most of the citizens are unbanked or there is poor banking system shows that cryptocurrency tends to succeed the banking system. Citizens of such countries, especially in the emerging markets and the third world countries prefer to use cryptocurrency than the banking system. Venezuela has proven this recently.

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