IMF Chief Christine Lagarde Bets on Bitcoin Tools to Make Financial System Safer

Chief of the International Monetary Fund - Christine Lagarde has been quite a lot vocal on digital currencies in the past, and although she might have never talked about their use, she had mentioned that one cannot turn a neglecting eye towards them.

Now, the IMF Chief has gone on record saying that the progress of Bitcoin and other digital currencies could make the financial system safer in the future. However, she also said that at the same time, one can’t ignore the prospects of some “inevitable” accidents waiting to happen.

Lagarde also said that there are some tools collectively being referred to as crypto-assets are there to bring a positive change in the global financial system making it cheaper, faster, and safer. She said that among these assets there are “real threats and needless fears.”

During a recently held IMF spring meeting between politicians and central banks in Washington, the IMF Chief in a blog post wrote that she hopes for a future where digital currencies could co-exist with traditional banking systems. The co-existence of such a financial system could build a “financial ecosystem that is more efficient and potentially more robust in resisting threats”, she said.

Just before the upcoming IMF global financial stability report that highlights the emerging risks from the world of banking, Lagarde pointed out some benefits relating to crypto assets. She said: “A clear-eyed approach can help us harness the gains and avoid the pitfalls.”

The unprecedented growth of the crypto markets in the past few years has created an alternative financial system for holding and moving money which is preferred over the traditional banking systems due to some benefits like instant transfers, low-cost transactions fees, etc.

Lagarde also made a vis-a-vis comparison of the latest crypto craze to the Internet boom of the 1990s. At that time tens of thousands of tech companies had started and only few could sustain the winds after the dot-com crash. She said that the current scenario is same with thousands of cryptocurrencies present in the market which has ballooned up recently of which many crypto-assets were bound to fail.

She said that only those crypto-assets that can survive this winds of “creative destruction” will be deciding on how we can save, invest and pay our bills.

However, last month, Lagarde had issued a warning and demanded a collective an unanimous global effort to regulate cryptocurrencies. To tackle the regulatory issue, she also called for fighting ‘fire with fire’ for tracking cryptos using the blockchain technology. She also said that the failure to bring digital currencies under control would trigger the development of a “potentially major new vehicle for money laundering and the financing of terrorism.”