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IMF Official: Central Banks Need to Compete With Crypto

A deputy director for the International Monetary Fund’s Monetary and Capital Markets Department believes that central banks need to offer “better” fiat currencies in order to fend off any potential competition from cryptocurrencies.

The suggestions came in an article published Thursday, penned by deputy director Dong He. In that article – which boasts the tagline “Crypto assets may one day reduce demand for central bank money” –  He argues that central banks may want to consider adopting some of the concepts in order to “forestall the competitive pressure crypto assets may exert on fiat currencies.”

It’s a notable statement and one that echoes past remarks from He as well as other IMF officials, including director Christine Lagarde. Indeed, Lagarde, back in March, said during an event that regulators should deploy some elements of the tech in order to “fight fire with fire.

He’s argument in the latest piece is based on the possibility that, should cryptocurrencies and crypto-assets see wider adoption, there is a chance that central banks will lose their ability to influence the economy through tactics such as interest rate changes.

The deputy director suggested that tightening regulation could provide a boost for central banks.

“Second, government authorities should regulate the use of crypto assets to prevent regulatory arbitrage and any unfair competitive advantage crypto assets may derive from lighter regulation,” He wrote. “That means rigorously applying measures to prevent money laundering and the financing of terrorism, strengthening consumer protection, and effectively taxing crypto transactions.”

He also pointed to the idea of central banks creating their own digitized assets that could be exchanged in a peer-to-peer fashion

“For example, they could make central bank money user-friendly in the digital world by issuing digital tokens of their own to supplement physical cash and bank reserves. Such central bank digital currency could be exchanged, peer to peer in a decentralized manner, much as crypto assets are,” the article went on to say.

It’s an idea that a number of central banks are researching, though opinions differ on the effectiveness of such proposals. Just this week, for example, an official for the Hong Kong Monetary Authority (the region’s de facto central bank) said that it currently has no plans for a digital currency launch in spite of its research in the area.

Image Credit: Kristi Blokhin / Shutterstock.com

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Ex-IMF Economist: Bitcoin Could Drop to $100 in the Next Decade

A well-known economist has predicted a steep drop in the price of bitcoin over the long-term.

Kenneth Rogoff, a Harvard professor and former chief economist at the International Monetary Fund, said on CNBC’s Squawk Box program on Tuesday that he expects a fall to as low as $100 over the net decade.

Rogoff remarked on the show:

“I think bitcoin will be worth a tiny fraction of what it is now if we’re headed out 10 years from now…I would see $100 as being a lot more likely than $100,000 ten years from now.”

Rogoff struck a critical tone about bitcoin’s use as a means of payment, arguing that there aren’t many uses for bitcoin payments beyond tax evasion and money laundering. Indeed, the former IMF economist has put forward what could be called an ultra-bearish stance on bitcoin prices in the past. Last October, he wrote an op-ed for The Guardian arguing the price of bitcoin will collapse even if the underlying technology thrives.

In part, he based this theory on the idea that governments would not allow decentralized or anonymous cryptocurrencies to completely replace state-issued tender.

Other researchers, looking at bitcoin’s value proposition through the payments angle, have reached other conclusions in the past. Digital Asset Research estimated that bitcoin transaction use cases in 2017 would have established roughly a $2,074 value – even without speculative trading or any store of value market.

And on the illicit activity front, a study by the British blockchain analytics firm Elliptic found only 0.61 percent of the money involved in European bitcoin exchanges and conversion services were verifiably connected to such uses.

Although Rogoff may not be the biggest fan of bitcoin, he still advocated during Tuesday’s interview for a global regulatory response rather than outright bans.

“It really needs to be global regulation. Even if the U.S. cracks down on it and China cracks down, but Japan doesn’t, people will be able to still launder money through Japan,” he said.

Japan is a unique example to cite, considering the nation boasts perhaps one of the world’s most mature regulatory frameworks to date. Japanese regulators said in February that they plan to ramp up on-site exchange inspections – a notable position to take considering that the National Police Agency reportedly identified 669 cases of suspected money laundering from exchange platforms between April and December 2017.

Image Credit: Richter Frank-Jurgen/Flickr

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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IMF Chief Lagarde: Global Cryptocurrency Regulation Is 'Inevitable'

Christine Lagarde, head of the International Monetary Fund, has stated that international regulatory action on cryptocurrencies is “inevitable.”

Lagarde, who is the managing director of the international organization that aims to foster global financial stability, said that the IMF’s concerns over cryptocurrencies stem largely from their potential use in illicit financial activities.

In an interview with CNNMoney on Feb. 11, she said:

“We are actively engaging in anti-money laundering and countering the financing of terrorism. And that reinforces our determination to work on those two directions.”

Lagarde further explained that the regulatory direction should be activity-based, focusing on “who is doing what, and whether they’re properly licensed and supervised.”

While the new comments are largely in line with Lagarde’s already public views on cryptocurrency, it indicates the IMF may be moving to be more actively involved in preventing the illicit use of cryptocurrency.

On multiple occasions, Lagarde has previously cautioned that cryptocurrencies should be taken seriously and called for global cooperation among worldwide regulators. And she is not alone in voicing concerns over use of cryptocurrency in cross-border financial crimes.

According to an earlier report by CoinDesk, during the Davos World Economic Forum in late January, several worldwide leaders shared the same sentiment, including the U.K. Prime Minister Theresa May, French President Emmanuel Macron and the secretary of the U.S. Treasury Department Steven Mnuchin.

And, just last week, senior officials from France and Germany called for the G20 group of nations to discuss cooperative action on cryptocurrencies ahead of a summit next month.

Christine Lagarde image via Shutterstock

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IMF's Lagarde: Ignoring Cryptocurrencies 'May Not Be Wise'

The head of the International Monetary Fund (IMF) believes that cryptocurrencies may give traditional government-issued ones a “run for their money.”

Speaking at a conference in London, IMF chief Christine Lagarde told attendees that she thinks “it may not be wise to dismiss virtual currencies.”

Notably, she outlined possible scenarios in which a country – particularly those with “weak institutions and unstable national currencies” might actually embrace one more directly.

“Instead of adopting the currency of another country – such as the U.S. dollar – some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0,” she said.

One of the driving factors behind that potential evolution would be a shift in consumer preference for new currencies that are “easier and safer” than existing ones. That scenario could be further hastened if cryptocurrencies “actually become more stable,” she said.

Lagarde went on to say:

“So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.”

That said, Lagarde noted earlier in her speech that such an outcome is, in her view, a distant prospect, saying that cryptocurrencies are “too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable.”

To date, the IMF has advocated a balanced approach on cryptocurrency regulation, voicing that position in a January 2016 staff paper. Lagarde has also voiced support for financial applications of blockchain, a subject that the IMF has explored on an organizational level as well.

Image Credit: 360b / Shutterstock.com

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