Christine Lagarde, head of the International Monetary Fund, has said in an interview with CNBC that she thinks cryptocurrencies are “shaking the system” and that the “disrupters are having an impact.” Speaking to the broadcaster at the World Bank Spring Meetings 2019 summit in Washington, Lagarde, who is known to be less anti-crypto as some of her peers, was speaking about the move by international banks from legacy payment systems to more advanced, high speed, low-cost mechanisms like cryptocurrencies.
While she was chiefly referencing internal banking systems rather than decentralized currencies that are traded on the market, Lagarde’s choice of language represents a clear shift in the tone compared to years gone by.
Not Going to Pump Your Bags
During the interview, Lagarde referenced a “very large systemic bank” that had revealed during the conference that it was launching its own digital coin, as well as mentioning the TARGET Instant Payment Settlement (TIPS) system that was introduced in November. This technology allows Eurozone banks to conduct large cross border payments instantly at almost no cost. This is clear evidence that the emergence of blockchain technology has forced existing fintech companies to innovate rather than work with external companies offering blockchain solutions. This can be evidenced by the development of JPMorgan’s own coin and the statement from TransferWise founder Taavet Hinrikus that existing fintech solutions were preferable to new blockchain-based solutions, partly because of the adoption issue.
Lagarde first spoke publicly on the matter of cryptocurrency in 2016 when she presented on the subject at the World Economic Forum in Davos. She was broadly positive on the solutions they offered, a stance she has reaffirmed ever since, although the subject of regulation is now firmly at the top of her agenda, as well as those of governments around the globe. She also voiced concerns about the instability that a mass adoption of digital assets could bring to the financial system were it not properly managed, a sentiment echoed by Benoît Cœuré of the European Central Bank. He warned of the “fragility decentralization can introduce in the system if not properly managed.” Presumably, this fragility is exactly what the original cypherpunks were dreaming about when they first came up with the idea for digital cash in the 1990s.