Supranational economic institutions have been studying the effects of cryptocurrency and blockchain. In a report released by the IMF, July 15, 2019, they highlight the potential for cryptocurrencies and traditional digital money to spark a new age of payments. In the future, it is idealised that cash dependence will severely reduce and most economic activity will be digital.
Ushering in a Digital Economy
Today, you can walk into a coffee shop and swipe a card or scan a barcode, then proceed to walk away with both parties fully assured that a payment was made. Someone from the 1900s would’ve thought it was magic or some kind of illusion.
The IMF predicts that the adoption of e-money will be rapid going forward. Their definition of e-money are payment providers like Alipay, M-Pesa, PayTM, and WeChat as well as cryptocurrencies like Libra and other stablecoins. An evident inference from this is that the IMF and other supranational institutions do not see Bitcoin as a legitimate payment service.
CBDCs or Central Bank Digital Currencies, encompass any cryptocurrency or digital coin issued by a central bank and backed by their reserves. The IMF seems to stress that they will be reliable as they are backed by fiat reserves without acknowledging that fiat itself is only backed by trust in governments and nothing physical or digital.
The Fiat Standard
Their disdain for Bitcoin is likely because of the volatile nature of the cryptocurrency, evident from their constant emphasis on stable forms of money.
A very interesting point touched upon by this report is the issuance of a corporate coin/private e-money that is tied to central bank reserves. At this point, the IMF makes its agenda crystal clear: fiat is and always will be the only form of money, everything else must be backed by fiat and indirectly tied to it. This further explains their fascination with stablecoins like Paxos and TrueUSD as they are directly backed by dollars.
Many are predicting this will lead to a huge influx of corporate cryptocurrencies in the public domain. JPM Coin is not publicly available yet, making Libra the only corporate crypto that will be available for public consumption.
Cryptocurrencies like Bitcoin will continue to flourish no matter what any government or institution says. It’s important to remember that Bitcoin is volatile when you measure it in terms of fiat; one bitcoin is always equal to one bitcoin.