Bitcoin took center stage at the Bank of England 20th year of Independence commemoration this week. IMF head Christine Lagarde commented that Bitcoin may give “existing currencies and monetary policy a run for their money”, and could possibly even be included in the IMF’s SDR basket.
Lagarde: Some Bitcoin in Your SDR Basket?
The Special Drawing Rights basket is a mix of national currencies that are given different weightings and used as an international reserve asset. Currently the basket is made up of USD, GBP, EUR, JPY and CNY. Lagarde commented that cryptocurrencies could be included as a way of increasing usage of the IMF unit.
“It is not a far-fetched hypothetical,” Lagarde said, noting that while digital currencies had some issues the IMF believed the public may want digital currencies as “they potentially offer the same cost and convenience as cash — no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities.”
— Tuur Demeester (@TuurDemeester) September 29, 2017
It is not the first time the IMF has mentioned cryptocurrencies in public. However their previous missives have seemed to favor permissioned ledgers over open source protocols like Bitcoin.
Giving bitcoin currency a weighting in the SDR basket would imbue instant global validation, but many believe a digital version of the SDR would just be a trojan horse for the implementation of an increasingly dystopian future — where taxes are taken at will and all transactions are logged and scrutinized.
Lagarde did nothing to dispel this sentiment when she projected that, due to instability in many cryptocurrencies, “citizens may even call on central banks to provide digital forms of legal tender.”
However, on the other hand the possible inclusion of bitcoin and Ethereum’s ether in the weighting of the SDR basket would have profound geopolitical and economic implications for cryptocurrencies.
Even though bitcoin would seem to be the digital antithesis of an organization with a power structure like the IMF’s, Lagarde hinted that if a digital version of the SDR were to iron out what the IMF perceived as problems, then a situation of rising geopolitical uncertainty and war “would be propitious for relying on an alternative”.
It is thought that in a deteriorating geopolitical or financial environment bitcoin, like gold, already acts in this way — as an ungoverned and unaffiliated asset. However there is no denying the impact inclusion in the SDR would have.
Would North Korea Actually Use Bitcoin?
This line of thought is interesting to note in the wake of reports that North Korea had begun large scale Bitcoin mining and has allegedly been behind thefts of bitcoin from a number of Korean and Chinese exchanges in recent times.
The theory is that bitcoin provides an effective way for the brutal totalitarian regime of Kim Jong Il to bypass economic sanctions imposed by the UN.
If such a method for funding a tyrannical regime is successful it could encourage countries to stockpile bitcoin as a form of insurance. It would also stir up a moral and ethical debate surrounding the use of the network by a regime widely considered to be one of the worst abusers of human rights in the world.
Could North Korea be using Bitcoin to sustain its regime or to feed its people?
This also puts the recent closures of BTC-e and Chinese bitcoin exchanges, as well as the banning of ICO trading, in a whole new light. Is the U.S. leaning on countries to block North Korea’s access to alternative funding, or is there a genuine concern to regulate the cryptocurrency industry and weed out bad actors?
It seems there is never a dull moment in Bitcoin — a day after the South Korean ICO statement led to a price dip, the head of the IMF has mentioned Bitcoin in a largely positive light.
Bring on next week!
Could the IMF ever officially recognize bitcoin? Share your thoughts in the comments.
Images via The Telegraph, SCMP, YouTube