The IMF Talks the Future of Cryptocurrencies - Video and Thoughts

rycharde (63)in #crypto-news • 5 years ago (edited)

Today, the IMF held a round-table discussion regarding the future of cryptocurrencies.

Digitalization is reshaping economic activity, shrinking the role of cash and spurring new digital forms of money and payments. The panel—including representatives from central banks and the private sector (incumbents and disrupters)—will discuss the future of money and payments, focusing on the role of the private sector versus the central bank.

Should the central bank focus on providing the supporting infrastructure and regulating the market? Or should it actively and directly provide payment services (such as by offering central bank digital currency)?

What is the role of the state in ensuring trust in payment services? Does regulation favor banks or non-banks?

Are private forms of money provided by non-banks substitutes or complements to banking services? Can the private sector build trust independently, such as through decentralized ledger technologies?

What are the implications of these developments for financial intermediation, stability, consumer protection, and even privacy?

From Money and Payments in the Digital Age

This is a very important discussion, yet very few people have bothered watching this - perhaps everyone is busy with FUD or FOMO.

A good review is here: ‘In Crypto We Trust,’ Says Circle’s Jeremy Allaire at IMF Spring Meeting

One important quote:

Allaire said that if sovereign money went onto the internet in a way where people didn’t need a third party to hold their assets safely and they could trade with anyone on the planet quickly, then “they wouldn’t want to go back.”

Once that happens, everyone will want to use the most stable currencies, which will mean reserve currencies. That, he predicted, will threaten governments that don’t have reserve-status money.

I would expect a cryptocurrency to be launched pegged to the IMFs own SDR (Special Drawing Rights), a basket of the five most important global currencies. At that point, and depending on easy access (unlike JPMcoin), what would happen to other currencies?

One central banking obsession is "stability". This is a code-word for "control". Many people need growth far more than stability. The idea of stable growth has also been a mirage, just look any long-term graph of stockmarkets or GDPs.

Can stable growth be programmed into a cryptocurrency?

As we are witnessing with the top cryptos, encoding coin production does not guarantee prices. The price of any asset is always in relationship with another asset, most obviously the price denomination. Stablecoins are only stable with respect to the asset they are pegged to - not to anything else.

So is it even possible to have a world with just one reserve currency built on a blockchain? What would happen to other currencies? Well, they can easily disappear. But what about the reserve currencies that currently form the SDR? Would those central banks then convert all their money into SDRs at whatever future rate?

What would happen to gold? When the Dollar (and other currencies) came off the gold standard they effectively decoupled from the gold price and floated against each other using other metrics, such as interest rate. This has led to a world drowning in debt and gold acting as a partial hedge. Thus removing the peg to gold did not remove gold as an influence on currencies.

Therefore, any global reserve stablecoin that is then not pegged to anything other than its encoded economy, will still need to be used to purchase other things - things whose own prices will depend on other factors that influence supply and demand. That means that all those other products remain open to be tokenised, be they commodity prices or corporate coins replacing traded shares. Therefore, unless laws are enacted to forcibly stop alternative coins, a global stablecoin supported by the central banking cartel cannot stop the altcoin economy.

At that point, who would you trust? Watch the video to see how bankers are thinking about this. Interestingly, trustless networks are not high on their agenda. This further strengthens my view that stability is merely a mask for control - trust is a form of control. Trust that has been enshrined in law means that you are only allowed to do transactions within the law - just look at the arguments about whether coins are shares, and hence whether they should comply with the laws that govern share creation and ownership.

Like many things in life, to see who is control, try doing something that you are not allowed to do and see who turns up to stop you. Better still, figure it out before doing it. It is worth figuring out what the IMF will do as central bankers have a lot of money to play with compared to the nascent crypto market.