Rebel technology has been praised as being “safe, cheap and potentially semi-anonymous”, which is why governments are considering offering their own version of cryptocurrencies to top the systems being full of fraudsters. Christine Lagarde, head of the IMF has said that central banks need to work fast to establish digital cash for the large networks of private financial transactions, otherwise they could risk mushrooming into trading networks that are inherently unstable.
The IMF believes that there should be a system regulated by central banks that could become the base for the fastest expansion of financial services to developing world countries. This could also help the poorest people in western societies without the risks associated with privately managed digital currencies. This proposal by the IMF is most likely going to be viewed warily by digital currency operators. Those operators believe one of the main attractions of their fintech is the fact that is lies away from the mainstream banking systems. If a central bank gets involved, the regulation that gets involved could be seen as heavy handed and this can slow down transactions and raise costs.
If there are businesses out there that want to use the underlying blockchain technology to process transactions, they would be more likely to welcome the endorsement by the IMF and the proposed central bank involvement, as this will preserve the integrity surrounding new financial systems. Currently, the Bank of England is watching the development in digital currency closely. They are running the systems that process stock exchange and banking transactions. They also oversee the cash and coins that digital currencies are expected to replace over time.
Lagarde, speaking at a fintech conference held in Singapore, said that central banks would one day take over the processing of transactions while providers in the private sector offer innovative services to customers. She said: “The advantage is clear…payment would be immediate, safe, cheap and semi-anonymous.” Lagarde also said that there would be more of a level playing field for the competition, and a platform for innovation. There is also the fact that there is the fact that your bank or fellow entrepreneurs would have ensured a friendly user experience. This is all based on the latest technologies.
Blockchain technology, which is what underpins cryptocurrency transactions, lets the user maintain a digital account and to be paid in a digital currency like Bitcoin. They can use their account or digital wallet to make purchases anonymously. A lot of money is being pushed into startup businesses that offer blockchain technology based services. This is cheaper and faster than the services that are offered by mainstream banks.
Currencies like ethereum and Bitcoin always jump and fall in value, which limit their take-up. Bitcoin has been no stranger to suffering setbacks following a spate of robberies at digital currency exchanges – leaving millions of pounds out of pocket. Tests have been run by Sweden’s central bank, and the IMF has credited countries like China, Canada and Uruguay as also moving ahead with plans to provide a digital currency.