Yesterday, the IMF published a new report ‘The Rise of Digital Money’ outlining the potential effects cryptocurrencies will have on the current financial system and regulatory environment.
The report states that the two most common forms of money today, cash and deposits, will face tough competition and could even be surpassed. The IMF also said policymakers should be prepared for disruption from big tech companies and fintech start-ups.
We’ve contacted experts & leaders in the blockchain and cryptocurrency space to find out their thoughts on the report.
Nick Cowan, CEO of the Gibraltar Stock Exchange (GSX) Group, geared towards establishing a trusted financial services group for the new digital era, said:
“The concept of digital currency is now firmly embedded in the mainstream, a trend that is set to gain increasing traction according to the latest report from the IMF. The report acknowledges several scenarios that could play out in the future, from coexistence between digital currencies and traditional money, to a total digital takeover. It is important to remember that the rise of bitcoin and digital assets has been fueled, in part, due to growing dissatisfaction with the status quo of traditional finance and the associated problems such as transaction delays, unnecessarily protracted processes, and frustrating intermediary fees. As long as these issues are prevalent, the allure of digital currency will be strong.
The IMF report also notes that regulation of e-money issuers must be prioritised in order to protect customers and avoid risks to financial stability. Here in Gibraltar we are familiar with the merits of a purpose-built Distributed-Ledger-Technology (DLT) regulatory framework. Receiving our DLT licence has enabled the GSX Group of companies to provide our users with the highest standards in digital asset trading, investor protection, and security.”
Christophe De Courson, CEO of Olymp Capital, one of the earliest investment fund managers dedicated to the blockchain and digital asset class in Europe, said:
“Given the IMF is tasked with securing financial stability and working to foster global monetary cooperation, it makes sense why this paper was published. Across the globe countries are tackling inflation, expensive remittances, and financial exclusion. Digital currencies, in particular stablecoins, are being explored by private sector firms with the aim of solving these issues. It’s becoming increasingly evident that they may succeed, as the report correctly points out — big tech firms and fintech start-ups are “experts at delivering convenient, attractive, low-cost and trusted services to a large network of customers.”
Not only is this causing disruption for traditional financial players but it is also forcing them to take heed of the space. Governor of the Bank of France, Francois Villeroy de Galhau, recently said that the bank is observing ‘with great interest’ initiatives in the private sector which aim at developing networks within which stablecoins would be used in transactions involving ‘tokenized’ securities or goods and services. This IMF report highlights both the looming reality for legacy institutions and the potential for major disruption from fintechs”.
Dave Hodgson, Director and Co-founder of NEM Ventures, the venture capital and investments arm of the NEM blockchain ecosystem, said:
“The IMF report provides a balanced overview of the current situation, and I agree with their conclusion that e-money and digital currencies will continue to disrupt other the financial industry. Traditional finance, in particular, has become bloated, inefficient and inappropriately costly, and frankly it’s time for a change.
Digital currencies allow for the efficient and cost effective transfer of value between two parties, and aren’t reliant on national borders. This makes them largely resilient to attempts at national control and manipulation, while also removing systemic inefficiencies within the current financial systems, namely with layers of intermediaries. I can receive an Amazon parcel from the USA to Europe, faster than I can remit funds via Swift to pay for them; that’s not good enough.
I believe that mainstream adoption is imminent of both digital and crypto currencies – we’re already witnessing thousands of young retail consumers selecting challenger banks (largely e-money). This is direct result of improved service offerings, customer service and price points. Several cryptocurrency companies are now starting to cross over into traditional digital money by offering banking (IBAN, Debit card etc) services such as Wirex, Coinbase and Crypterium. It’s also worth noting that in Asia the concept of digital money is well established with services such as Alipay and Wechat.”
Sebastian Higgs, Director at Vo1t, which combines cutting-edge system design with cybersecurity best practices to create the world’s most secure cold storage vault for digital assets, said:
“The recent IMF report brings to light the many advantages of digital currencies, and what the future may look like in this space. For companies and businesses who make numerous international payments or operate in economies with weak domestic currencies, it may make sense to hold digital currencies.
With cryptocurrencies, the friction of moving between assets is already low, and I believe this will disappear almost entirely with the development of interoperability. Depending on whether you need to prioritise cost, privacy, smart contract execution, or even adhering to restrictions imposed by the merchant, digital currencies offer more flexibility to the user and will continue to rival traditional finance.
Of course, as a caveat, this is dependent on where you are: for instance, China won’t accept a Facebook crypto project so you may need to hold that coin, as well as a WeChat coin.”