IMF Report: Crypto can benefit the public

The OMFIF (Official Monetary and Financial Institutions Forum), an independent think tank for central banking, economic policy and public investment, issued a new bulletin. This 30-page bulletin has a variety of interesting articles on topics such as fintech and Islamic finance.

As mentioned in their abstract: ‘These developments reflect a growing focus on innovation and sustainability in investment practices. This was a key theme at this year’s International Monetary Fund-World Bank Group annual meetings in Bali, where OMFIF launched two new reports: on the development of capital markets in Africa, and on the application of blockchain technologies to central banks’ interbank payments systems. Adjusting investment shifts in the demographic and societal profiles of the global economy will drive the development of new specialist finance markets.’

This is the article that was widely shared by blockchain influencers and enthusiasts. The comprehensive article, “A Regulatory Approach to Fintech: Guarding Against Emerging Risks Without Stifling Innovation,” talks about the pros, cons, and challenges around the adoption of cryptocurrencies.

For more information on the bulletin, download it here. This article will highlight a few key paragraphs that were mentioned in this article touching upon cryptocurrencies.

Cryptocurrency-backed Assets don’t necessarily neglect stability

The article mentioned how cryptocurrency-backed assets don’t pose a threat to economic and financial stability, unlike traditional notions. This is what was mentioned, “The Financial Action task force has given guidance to its members on addressing money-laundering and terrorist-financing risk associated with crypto-assets. The Financial Stability Board, which coordinates financial regulation for the economies, is studying ways to monitor crypto-assets. The G20 agrees with the FSB’s assessment that crypto-assets do not pose a threat to stability, though they could pose a threat in the future.”

Lagarde portrays the three vital lessons that we need to take away from the 2008 global financial crisis.

“- Trust is the foundation of the financial system, but it is fragile and can be shaken easily.

– Risk accumulates in unexpected places. In the years before the crisis, financial instruments emerged that were poorly understood by investors, such as collateralized debt obligations. It is unclear whether a decentralized financial system will be more stable or less.

– In a globalized world, financial shocks quickly reverberate across borders. Responding to a crisis requires concerted action. And a global financial system may transmit shocks more quickly.”

With great risk comes great promise

This is what the article mentions about risk, “Financial technology offers considerable promise, but it also poses risks. Consider distributed ledger technology, which underpins crypto-assets. It can enable faster and cheaper transactions, store records securely and execute so-called smart contracts automatically. But, the technology has also been used for illicit purposes.”. This is a smartly-worded, generally vague statement on the blockchain, described here as a distributed ledger, that doesn’t go too much into details regarding how the blockchain emanates great promise in the future too.

“Today, some enthusiasts say crypto-assets may represent the beginning of a similar breakthrough. Others condemn crypto-assets as little more than a fad or a fraud. We should not dismiss them so lightly.” This statement here had a more positive tone that cryptocurrencies should not yet be dismissed in contrast to how many critics view the cryptocurrency industry as a fad or a bubble.

Regulation within the Cryptocurrency Industry

“Regulators face a difficult task. On the one hand, they must protect consumers and investors against fraud and combat tax evasion, money laundering and the financing of terrorism. They must also protect the integrity and stability of the financial system. On the other, they must beware of stifling innovation that benefits the public. By engaging with market participants at the center of financial innovation, regulators can stay abreast of the benefits of new technologies and identify risk. Developing a forward-looking regulatory framework calls for creativity, flexibility, and new expertise….”

Regulation is one of the hottest topics talked about within the cryptocurrency industry. CryptoTicker has reported multiple articles on the future of blockchain regulation and about how regulatory pressure finally catches up with cryptocurrencies.

This was the conclusive statement within the report.

“Above all, we must keep an open mind about crypto-assets and fintech, not only because of the risks they pose but also because of their potential to improve our lives. When in doubt, think of Bell and his telephone.” Indeed, well said!

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