IMF Says Cryptocurrencies Cannot Fulfill Basic Functions Of Money
To really trust an international body on where they stand on cryptocurrencies, it is prudent to check their views when the market is going through a rough time.Case in point: The International Monetary Fund (IMF) recently said, “Despite the hype, cryptocurrencies still don’t fulfill the basic functions of money as a store of value, means of exchange, and unit of account. Because their value is highly volatile, they have little use so far as a unit of account or a store of value. Limited acceptance for payment restricts their use as a medium of exchange. Unlike with fiat money, the cost of producing many cryptocurrencies is high, reflecting the large amount of energy needed to power the computers that solve the cryptographic puzzles.”A paper on the topic, was written by Antoine Bouveret who is an economist and Vikram Haksar who is an assistant director in the IMF’s Strategy, Policy, and Review Department.This statement comes, barely a year after the IMF’s chairman, Christine Lagarde said, she thought cryptocurrencies would be better for the future.In April last year, Lagarde had said, “Just as a few technologies that emerged from the dot-com era have transformed our lives, the crypto-assets that survive could have a significant impact on how we save, invest and pay our bills. That is why policymakers should keep an open mind and work toward an even-handed regulatory framework that minimizes risks while allowing the creative process to bear fruit.”Apart from that, at the Fintech Festival in Singapore, last November, she had made the case for cryptocurrencies and had said, “Data is the new gold and physical cash is on the way out.” She had also added, “Various central banks around the world are seriously considering these ideas, including Canada, China, Sweden, and Uruguay. They are embracing change and new thinking—as indeed is the IMF.”The rest of the paper primarily talks about the risks and pros of cryptocurrencies. While illuminating the good side of cryptocurrencies, the paper also says, that the pseudo-
anonymity of many cryptocurrencies makes them vulnerable to use in money laundering and terrorism financing, if no intermediary checks the integrity of transactions or the identity of the people making them.