Christine Lagarde, chief of International Monetary Fund (IMF), has recently come out to caution various governments not to ignore virtual currencies outrightly. She further asserted that digital currencies might in the future compete with the government-issued currency rapidly.
Countries that have unstable national currencies and weak institutions, as Lagarde in a London conference asserted, will surely adopt a foreign cryptocurrency.
Virtual currencies just like a currency of another country apply pressure to a country’s monetary policy and local currency. As economies continue to evolve in an advanced way, it calls for central bankers to respond with an effective monetary policy rapidly.
Attractiveness of the digital currency
Adoption of virtual currencies is expected to be driven by an anticipated shift in consumer preference amongst other factors as Lagarde cited. Even as the digital currencies become more stable, individuals will find it safer and easier than conventional ones.
However, Lagarde was quick to note that the prospects remain distant on cryptocurrencies takeover from traditional ones. She explained that as the technologies remain not so scalable, the virtual currencies are still too energy intensive, too risky, and too volatile.
Virtual currencies, according to IMF, have the long-term deeper financial inclusion and cost reduction that can revolutionalize the financial sector. IMF supports blockchain technology applications and promotes balance in digital currency regulation.