Recently, two very renowned personalities in the world Kristalina Georgieva, the managing director of the International Monetary Fund (IMF) and Christine Lagarde, President of the European Central Bank (ECB) shared their views in two separate events on crypto investment and the need of regulation.
Views of IMF Chief
On May 23, she spoke at a panel titled Central Bank Digital Currencies about her thoughts on cryptoassets in general and stablecoins and central bank digital currencies (CBDCs) in particular.
The IMF chief shared her thought about three types of digital money in the crypto world and stated followings:
“Well, so when someone promises you a 20% return on something that is not supported by any assets, we would consider it a pyramid; in other words, this is a pyramid in the digital realm, but we should not be mistaken to immediately categorize everything in the digital money world in a negative way since there are three categories.”
Three Categories of digital money as per IMF Chief
- Central bank digital currencies (CBDCs) that are backed by the state (nation) and provide certainty when transactions are finalized. Around the world, 90% of countries are looking for CBDCs.
- According to her, the stable coins are the second type of digital money. The name stablecoin comes from the fact that they are backed by assets and hence extremely stable. They resemble numerous market funds, however, they are money market funds in today’s digital world.
- The third sort of digital money is traditional crypto, which has a lower degree of reliability since it lacks support. The less support there is, the more one should be willing to incur the risk of this blowing up in one’s face, as happened a few days ago. The crypto was never intended to be backed up by almost anything. It is truly trusted that is created in a way that adds value. Bitcoin is a coin, but it is not money. Because a steady store of value is required for something to be money.
She also stated that many who lost money in crypto did so because they were not properly educated about this new investment world. She emphasized the importance of government regulation and financial education in the interests of all stakeholders.
She further stated following on the benefits of crypto:
“It [crypto] provides us all with faster service, cheaper costs, and greater inclusiveness, but only if we sort apples from oranges and bananas, which is our job. We have a great deal of responsibility to accomplish it correctly.”
Views of President of European Central Bank (ECB) on crypto regulation
Christine Lagarde, President of the European Central Bank (ECB), made a lot of fascinating comments on cryptocurrency when appearing as a guest on the Dutch television show “College Tour” on May 22.
On Decentralization of Finance and Crypto, she expressed that cryptoassets are highly speculative, and are very risky assets. The investment in these assets is a personal choice but she was concerned about the investors who have no understanding of the risks and therefore highlighted the need for regulation.
