The growth of bitcoin and other digital currencies could help create a safer global financial system despite the possibilities of “inevitable” accidents waiting to happen, Christine Lagarde, head of the International Monetary Fund (IMF) said.
Lagarde said some tools built using blockchain technology hold the potential to change the world of high finance by making it faster, cheaper and safer. In between these, there are “real threats and needless fears,” she added.
Lagarde said there was hope for a world where companies that use digital currencies could coexist with traditional finance systems like banks.
She also said that this level of diversity could create a “financial ecosystem that is more efficient and potentially more robust in resisting threats.”
A growing number of consumers have used cryptocurrencies as an alternative to holding and moving money and choose them over traditional banks. However, a lot of people have also incurred huge losses from volatile price movements and hacking of some crypto exchanges.
Lagarde has issued warnings before on the risks posed by cryptocurrencies like bitcoin. She even called for global regulators to stage a crackdown using the very same technology that powers them, to “fight fire with fire”.
Last month, Lagarde said failure to put cryptocurrencies under control would lead to the development of a “potential major new vehicle for money laundering and the financing of terrorism.”
Mark Carney, governor of the Bank of England, labeled bitcoin and other cryptocurrencies as “inherently risky” and that they fail in fulfilling their most basic function as money.
But, IMF’s Lagarde said there were benefits from looking again at crypto assets.
“A clear-eyed approach can help us harness the gains and avoid the pitfalls,” she said.