In a blog post this week, International Monetary Fund (IMF) Managing Director Christine Lagarde called for policymakers around the world to “keep an open mind” about cryptocurrencies and focus on developing what she called an “even-handed regulatory framework.” According to Lagarde, that approach will enable regulators to minimize potential risks in a way that doesn’t stifle creativity and innovation.
Lagarde’s post emphasized the potential benefits of cryptocurrency and blockchain technology. She cited crypto’s promise of faster and less expensive financial transactions, and the various ways that distributed ledger technology could impact market efficiency, records storage, and the secure management of data.
The IMF chief wrote that third-party entities like banks and brokers will continue to play a role as trusted intermediaries, but that decentralized technologies will help to diversify the world of finance. She suggested that the resulting balance between centralized and decentralized providers would make the financial system more efficient and resistant to threats.
Lagarde also addressed concerns that cryptocurrency could pose a risk to financial stability but said that there is no immediate risk of that, “given their still-small footprint and limited links to the rest of the financial system.” She did, however, recommend that regulators maintain vigilance as those crypto assets continue to gain mainstream acceptance.
With respect to regulation, Lagarde stressed the need for international cooperation and said that the IMF could play an important part in helping the world develop a more consistent approach to regulation of the crypto space:
“For this to happen, we must keep abreast of rapid developments in markets and technologies. We must act quickly to close the knowledge gaps that inhibit the effective monitoring of crypto-assets. There should be systemic risk assessment and timely policy responses, as well as measures to protect consumers, investors, and market integrity.
Understanding the risks that crypto-assets may pose to financial stability is vital if we are to distinguish between real threats and needless fears. That is why we need an even-handed regulatory agenda, one that protects against risks without discouraging innovation.”