IMF’s Lagarde: Disruptors like cryptocurrencies are ‘clearly shaking the system’

December 11, 2019

One of the main topics up there was cryptocurrencies. All sorts of companies now getting into this
effort, not least among them Facebook. What kind of threat does this pose to the
traditional banking system? You have incumbents, the banks,
commercial banks. And you have the disruptors. And clearly the disruptors are having an impact
on the incumbents. We just heard a very large systemic bank here
saying that they’re launching the digital coin, currently piloted in a way within the
institutional clients, but to be scaled beyond that. We heard from the European Central Bank that
they have launched in November something that is called TIPS that enables all the banks
in the eurozone to actually transfer instantly at virtually no cost money between them. So I think the role of the disruptors and
anything that is using distributed ledger technology, whether you call it crypto, assets,
currencies, or whatever, and it’s far from the bitcoins that we used to talk about a
year ago, that is clearly shaking the system. The voice that we heard which was I thought
really interesting were those of the regulators and central bank governors who said well,
yes, this is good and this is helpful. And it is changing the business model
of commercial banks. But we have to be mindful of two things:
trust and stability of the system. And we are equally concerned, we at the IMF,
about stability. We don’t want innovation that would shake
the system so much that we would lose the stability that is needed. Are regulators doing enough right now to ensure
that stability and as well competition from some of these big tech companies being involved
in this space? I think they’re mindful of wherever the
competition is coming from. The central bank governor of Kenya was explaining
to us that they gave a banking license to a telecom company. And I think in the future we have to look
at what lots of data collectors and movers are going to do and whether they’re going
to move into the banking space forcefully, in which case they will have to be regulated. They will have to be held accountable so that
they can be fully trusted. Madame Lagarde, I know you have a tight schedule. Thank you for joining us here. We always love to have you, and our viewers
are certainly happy to see you back with us. Thanks so much.

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