Christine Lagarde, the managing director of the International Monetary Fund (IMF), has recently stated that financial technologies like cryptocurrencies and blockchain networks are “shaking” the banking system, and have to be regulated.
Lagarde’s comments came during an interview with CNBC, following a panel devoted to “Money and Payments in the Digital Age,” which saw Circle’s Jeremy Allaire and JPMorgan Chase’s Sarah Youngwood debate.
The head of the IMF pointed out the changing business models of commercial banks are evidence innovations like cryptocurrencies are impacting the financial sector. She stated:
I think the role of the disruptors and anything that is using distributed ledger technology, whether you call it crypto, assets, currencies, or whatever … that is clearly shaking the system.
She noted that these changes to the financial industry have to be accompanied by regulation, as innovation shaking the system “so much that we would lose the stability that is needed” isn’t an optimal outcome, she noted.
Notably, various startups and leading tech giants have been starting to enter the banking sector, as the multitrillion-dollar market is reportedly ripe for innovation. Recently, it has been reported social media giant Facebook is working on its own cryptocurrency, with some suggesting it’s seeking $1 billion to fund its development.
Traditional banks are also changing up their business models. JPMorgan Chase has launched its own cryptocurrency, dubbed ‘JPM Coin’, which aims to help it instantly settle payments between clients. The bank’s CEO, Jamie Dimon, has hinted the coin may eventually see consumer use.
Lagarde added that tech companies entering the banking space must be subject to regulation, and that they “will have to be held accountable so that they can be fully trusted.” The head of the IMF has in the past urged central banks to “consider launching digital currencies” so they can keep up with the changing financial landscape.
She has in the past noted she believes cryptocurrency regulations are inevitable, but has argued these have a positive role in the financial system, as they increase financial inclusion and offer people an alternative to national currencies.