The International Monetary Fund (IMF) has published a video and an article explaining what cryptocurrencies are.
— IMF (@IMFNews) August 23, 2020
The IMF has been following developments in this area with interest for some time now, so much so that almost two years ago the then director Christine Lagarde explicitly asked the central banks to consider issuing digital coins.
Cryptocurrencies explained by the IMF
The explanation that the International Monetary Fund gives for cryptocurrencies is very concise, quite informative and not technical, and definitely very interesting.
For example, the video concludes by saying:
“This could be the next step in the evolution of money”.
The article, entitled “Back to Basics. What Are Cryptocurrencies?”, defines them as a potential new form of money that offers advantages as well as risks.
The article itself, in fact, begins with a brief overview of the history of money, precisely to trace the fundamentals that cryptocurrencies seem to question.
In particular, it explains how in the past, states introduced legal tender, which has no intrinsic value, and that these fiat currencies did not always have a stable value or were widely accepted, mainly because creditors did not trust the issuer.
Moreover, states that issued their own fiat currency were tempted to print more and more currency, thus fuelling inflation.
The solution to this last problem was to entrust the issuance of fiat currency to central banks with the precise task of maintaining price stability by regulating the money supply in place of, and on behalf of, governments.
The cryptocurrency revolution
The cryptocurrency revolution could really be a step forward in this millennial evolution, since they do not need a central agent to be trusted.
As the IMF article explains, cryptocurrencies rely on a distributed ledger technology, the blockchain, which generates a ledger that is maintained by a computer network, the correctness of which can be verified by every member of the network itself.
The article also explains the existence of the two keys of the wallets, public and private, and how they work.
Finally, the IMF article concludes with a list of risks and benefits, highlighting a sound knowledge of these new technologies and an interested but decidedly impartial approach.
The IMF and the BIS in comparison
This approach is almost diametrically opposed to that of the Bank for International Settlements (BIS), which long ago expressed very harsh positions towards cryptocurrencies, denoting a lack of knowledge of their functioning and a decidedly sectarian and superficial approach.
In contrast, the IMF has shown clear interest and a good dose of impartiality, which probably reveals a sincere intention to understand the functioning of this technological innovation which undoubtedly has enormous potential.