Industry Analysis

Rapid growth of cryptocurrencies will bring challenges to the financial system

Challenges ahead for the Financial system

The IMF has been focused on the rapid developments of cryptocurrencies and the challenges it presents to the global financial system. Christine Lagarde is the head of the International Monetary Funds (IMF) had this to say about the world moving to another financial crash. Which may prove to be even bigger than the 2008 financial disaster. She thinks that the increased cybersecurity risks that are coming from the quick developments of financial technologies like digital currencies, will remind us that technology keeps evolving. Especially, now that we have digital currencies like Bitcoin and Ether that is creeping up into the financial system. It now requires regulations and supervision in order to provide extra security to individuals and businesses.

Christine, the Managing Director gave a speech at the forthcoming of the IMF annual meeting stating that there will be large challenges looming for the global economy to prevent a second Great  Depression. The corporations involved are concerned with the Banks concentrating power, the rise in lending by the Banks of China. There also the instability of insurance companies and asset managers, which costs trillions of dollars in the economy.

The Global debt of private and public sectors has hit all-time highs of over 182 trillion dollars, this is a growth of more than 60 percent since the Great Recession that occurred back in 2008. Governments in the developing world together with business firms are concerned with the vulnerabilities of rising interest rates, that is coming from the U.S. Federal Reserve. This kind of issues in the financial system can trigger a flight of funds in order to get financial institutions out of debts or insolvency, Crises like this can be seen in Argentina and Turkey.

The monetary problems in finance

The IMF mentioned cryptocurrencies in chapter 2 of the plans ahead.  This report is about the Global Financial Stability in regards to Regulatory Reform, 10 years after the Global financial crisis. The advice that was given to regulators was to remain attentive to risks that are coming from the Fintech and cybersecurity sector.

“Despite its potential benefits, our knowledge of its potential risks and how they might play out is still developing. The increased cybersecurity risks pose challenges for financial institutions, financial infrastructure, and regulators and supervisors. These developments should act as a reminder that the financial system is permanently evolving and that regulators together with supervisors must remain vigilant to this evolution and ready to act if needed.”

The Bitcoin technology and cryptocurrency market were first founded and supported by libertarians and technologists after the 2008 financial crisis. This caused a lot of digital currency enthusiasts to join into the cryptocurrency ecosystem and get away from the fiat monetary system, that is controlled by Central Banks and Governments. Christine Lagarde has a very optimistic view of the future of cryptocurrencies in the monetary system.

Digital currencies will play a huge role in how people save, pay their bills and invest money. According to the IMF chief, she wrote in her blog that:

“In developing economies, such advances can help secure property rights, increase market confidence and promote investment.”

Libertarians like Rover Ver, John McAfee, and Christine Lagarde all defend the role of Central Banks in the managing of currencies in the financial system. If cryptocurrencies get more issues with privacy for crypto assets then the global economic system will remain risky and unstable. This may also lead to Central Banks having a necessity for digital forms of money in the future.

What is your opinion on these developments in the cryptocurrency industry? Please feel free to leave a comment down below.




My occupation is the Research of blockchains and their practical applications in the economy. I have graduated through various levels of education, including electrical technique, Business, Psychology, and innovative technologies.

Leave a Comment

Your e-mail address will not be published. Required fields are marked *