IMF’s Managing Director Christine Lagarde post “An Even-handed Approach to Crypto-Assets” brings an optimistic view of the potential good side of crypto. This balances against previous darker post “Addressing the Dark Side of the Crypto World“.
Comparing posts we can see the concerns of crypto usage for money laundering, terrorism funding and criminal activities and how it relates to some key features of cryptocurrencies: decentralization, data integrity, transaction security, digital democratic access.
In broad, Lagarde highlights the role a broad collaboration environment (eg IMF according to her) can help development:
“Just as a few technologies that emerged from the dot-com era have transformed our lives, the crypto-assets that survive could have a significant impact on how we save, invest and pay our bills. That is why policymakers should keep an open mind and work toward an even-handed regulatory framework that minimizes risks while allowing the creative process to bear fruit….(…)
What are some of the potential benefits? Answers are already starting to take shape.
Fast, inexpensive
- Crypto-assets enable fast and inexpensive financial transactions, while offering some of the convenience of cash. (…)
- The underlying technology of crypto-assets—distributed ledger technology, or DLT—could help financial markets function more efficiently. Self-executing and self-enforcing “smart contracts” could eliminate the need for some intermediaries. (…)
- Secure storage of important records is another promising use for DLT.(…)
- In developing economies, such advances can help secure property rights, increase market confidence and promote investment. (…)
A better balance
(…) 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.
(…) given their still-small footprint and limited links to the rest of the financial system, crypto-assets do not pose an immediate danger. Even so, regulators should remain vigilant (…)
Even-handed approach
Before crypto-assets can transform financial activity in a meaningful and lasting way, they must earn the confidence and support of consumers and authorities. An important initial step will be to reach a consensus within the global regulatory community on the role crypto-assets should play. Because crypto-assets know no boundaries, international cooperation will be essential.
Here, the IMF, with a membership of 189 countries, can play a key role by offering advice and serving as a forum for discussion and collaboration in the development of a consistent regulatory approach.
(…)
Understanding the risks that crypto-assets may pose to financial stability is vital if we are to distinguish between real threats and needless fears. That is why we need an even-handed regulatory agenda, one that protects against risks without discouraging innovation.
A clear-eyed approach can help us harness the gains and avoid the pitfalls of the new crypto-assets landscape.”