Christine Lagarde, the Managing Director of the International Monetary Fund, is making waves in the crypto sea again, churning away on both sides of the debate, while the crypto community accuses her of hypocrisy of the first order. On one day, she posits in an interview with CNBC that all things crypto are a disruptive technology that is definitely changing the way businesses operate, but in order to make the changes acceptable, there must be controlling regulations in place. A day or two later, the IMF announces that it is teaming up with the World Bank to operate an internal coin system to facilitate its staff learning the ins and out of cryptocurrencies and blockchain technology.
In some ways, one could interpret these announcements as mixed messages, but, if you read between the lines, the words chosen are indicative of a fearful regulatory body that does not know exactly how to deal with fast-paced innovation, especially when the changes have to do with the international banking system. Her specific phrasing during the interview was:
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.
Her fear is that, if innovation were allowed to proceed without accompanying regulations in place, then the infrastructure could be at risk, or more explicitly, these changes could “shake the system so much that we would lose the stability”. She also added that:
We don’t want that,” as if speaking on behalf of the entire world. This is the same Christine Lagarde that back in November was espousing cryptocurrencies in developing countries, but only if the respective central bank controlled the action. Her plea at that time appeared to favor helping the “little people” that depend on cash: “Banks are not exactly rushing to serve poor and rural populations.
As a matter of fact, banking authorities in both China and India have used the “potential loss of stability” argument to justify quasi-bans on cryptocurrencies in both countries, almost as if Ms. Lagarde had given them the words to use in their respective press releases. A number of other central bankers, however, may have taken her remarks to heart, as well, since the World Economic Forum recently noted that there are a number of “Central Bank Digital Currency” (CBDC) pilot projects in operation across the globe. Those bankers consider crypto experimentation as a good thing.
The IMF and the World Bank must also agree with these bankers, too. The news per one report read: “The project is called “Learning Coin”… According to a recent report from the Financial Times, the aforementioned two economic powerhouses have launched a “quasi-cryptocurrency” to garner more knowledge of blockchain technologies and their real-world applications. In a statement, the IMF explained that this crypto asset, if you can even call it that, will give its staff a better understanding of the goods, smart contracts and transparency, and bads, such as money laundering, of this technology.”
The so-called “Learning Coin” may never see the light of day outside the confines of the IMF and the World Bank (both entities are headquartered in Washington, D.C.), but it will give the staff of both organizations an opportunity to study how distributed ledger systems really work. Decentralized systems are an anathema to bankers and regulators that are accustomed to overseeing operating systems from a single point of control, but fintech companies on the other had are searching for the benefits of a decentralized operating platform design.
How does Ms. Lagarde regard these fintech companies? She is quite blunt: “They will have to be held accountable so that they can be fully trusted.”