Last month Christine Lagarde, the managing director of the IMF, warned the world about the dangers of cryptocurrencies and the overall rise of fintech. This month, she’s back-peddling just a tad and offering some points that show the benefits of fintech.
The key point here, though, is she is still pushing for regulation of fintech, but under the guise of saying she thinks that regulations should be “even-handed” and “balanced,” which is the same thing as saying “common sense gun control.”
While some might react to the IMF head’s words as being encouraging for fintech, I recognize them for what they are, a dialectical approach to soft-peddling control over parts of human interaction that coercive enterprises have no business attempting to control.
I also recognize that coercive enterprises cannot walk away from fintech, for, if they do, their coercive enterprise competitors will be sure to use fintech to their advantage.
The powers that be cannot put the fintech genie in the bottle, though I’m sure they want to. They can’t put it back in the bottle, but, they fancy they can at least control it and manipulate it their own ends. THIS is what Christine Lagarde is saying in her latest words on fintech.
|IMF’s Christine Lagarde Seeks to Achieve “Clear-Eyed” Cryptocurrency Regulation|
Christine Lagarde remains rather positive when it comes to cryptocurrencies. She is convinced that this new form of money can make a rather positive impact in the years to come, assuming regulators let this industry grow and evolve on its own terms.
In her most recent blog post, Lagarde advocates for an “even-handed approach to cryptocurrencies”. While that may sound a bit confusing, it’s evident Lagarde wants to see this form of money succeed, as Bitcoin and its cohorts can peacefully coexist with traditional forms of money.
Additionally, most people realize that regulating cryptocurrency serves no real purpose. It isn’t even possible to do so, as there is no centralized authority to control. All regulators can do is make life unnecessarily difficult for companies offering crypto-related services, although it remains to be seen whether or not that will be the case in Europe and beyond.
More from her blog post:
In my view, the fintech revolution will not eliminate the need for trusted intermediaries, such as brokers and bankers. 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.
What are the implications for financial stability? Our preliminary assessment is that, 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: crypto-assets have the potential to magnify the risks of highly leveraged trading, and to increase the transmission of economic shocks should they become more integrated into mainstream financial products.
Moreover, banks and other financial institutions will face challenges to their business models, should there be a large-scale shift away from government-issued currencies toward crypto-assets. Regulators might find it harder to ensure the stability of a more diffuse and decentralized financial system. Central banks might have more trouble acting as the lender of last resort in case of a crisis.