Cryptocurrency “Clearly Shaking the System”, says IMF President Lagarde
Christine Lagarde, president of the IMF, sees fintech developments as potentially disrupting the banking system.
Cryptocurrencies and financial technology developments are “shaking” the banking system and must be monitored, stated Christine Lagarde, Managing Director of the International Monetary Fund, while speaking to CNBC.
Lagarde also pointed out that commercial banks are changing their business models to respond to the pressures of fintech and cryptocurrencies.
“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 said.
Digital platforms are currently building various payment systems, competing with the previous generations of fintech apps. Projects like Crypto.com are gaining popularity. Recently, Bitcoin marked 400 million transactions as usage and active wallets are picking up again as well.
However, digital currencies are no longer a fully anonymous payment system, as most projects require a form of customer screening (KYC) and enforce money-laundering regulations.
“We don’t want innovation that would shake the system so much that we would lose the stability that is needed,” Lagarde said.
The remarks were made during a discussion panel following the Spring Meeting of the IMF in Washington. In the past years, digital assets moved into the mainstream, while central banks made their own research on the matter. The European Central Bank’s position is that Bitcoin is too slow and incapable of carrying the volume of financial transactions in the world economy. Additionally, digital assets are still not considered currency in most jurisdictions, and are either treated as commodities or securities.
Currently, the banking sector is expecting an overhaul of the SWIFT interbank system to speed up payments. A limited number of banks is testing the networks of Ripple and Stellar (XLM) for faster and cheaper interbank transfers.
Bitcoin is seen as decentralized, because there is no central bank to control the issuance and the value of money, or inflation. The supply and issuance of most digital coins or tokens is predetermined, depending on the use case.