Christine Lagarde, the chief of the IMF since 2011, set up a debate between executives at cryptocurrency firm Circle and JPMorgan, the largest bank in the United States. The discussion between the two parties centered on the topic of “Money and Payments in the Digital Age.”
Sovereign cryptos without third parties will be welcomed by the people
Lagarde began the discussion by pointing out that cash is disappearing while mobile transactions are on the rise, especially in countries such as China. Peer to peer transactions have gained popularity even in countries such as Kenya, with a strong showing recorded in Europe as well.
The CEO of Circle, Jeremy Allaire, noted that there is a difference between P2P transactions and cryptocurrencies. He stated that, while mobile payment systems such as Alipay, Apple Pay, and others have a better user experience, cryptos show an impulse that is endemic to the internet.
Sarah Youngwood from JPMorgan, while speaking on behalf of the bank, revealed that they love competition as it makes them better. However, she maintained that there is a need for regulation. JPMorgan welcomes competition in the financial sector as long as the activities of the new industry are regulated and that they are formed and performed for solving and resolving customer issues. Youngwood talked about JPMorgan’s role in the emerging sector, with the creation of JPM Coin one of the points raised by the bank’s representative.
Lagarde asked the panel not to discuss anything about Bitcoin. Allaire addressed the possibility of developing a sovereign cryptocurrency hosted on a public blockchain. He stated that any sovereign currency that is hosted on the internet where people don’t require the services of third parties to hold their funds safely and could transfer funds to anyone around the globe quickly would not need to go back to a cash-based centralized system.
He added that if that were to happen, then people would prefer to use stable currencies and that would present a threat to governments that don’t have reserve currencies.
Banks are tech companies
Youngwood argued that banks are tech companies that are known for providing the transparency and security needed and demanded by their customers. Allaire noted that the same level of trust is offered by cryptography. Once people can trust the math behind everything, then technology can be used to verify everything for people with access to the internet.
Allaire claimed that the security of open-ledger networks is higher than what banks currently offer. The other panelists did not agree with his statement, with Youngwood arguing that the consistent and wide-ranging hacks and fraud that are regularly carried out within the cryptosphere are more common and likely than with virtually all other forms of payment that have ever existed.
Regulators concerned about decentralization
Allaire was more focused on the decentralization of processes within governments and industries, saying that payment is just a sideshow of cryptocurrencies; the real interest is in automation and integration by digitizing and decentralizing systems and processes.
EU regulator Benoît Cœuré, who works for the ECB 9 European Central Bank, expressed concerns regarding decentralization and the effect it could have on the future of the global economy. Benoit stated that he is concerned about the fragility that decentralization will introduce to systems if they are not appropriately managed.
To back up his claim, Benoit cited 2007, right before the global economic meltdown, as the perfect example. He stated that the crisis at that time was caused by risks being thinly spread across the system. He added that regulators were assured back then that spreading out the risks would help make the system more resilient. However, that wasn’t the case.
Bitcoin was created after the global economic crash to correct the wrongs that centralized financial systems caused or led to. However, there is still concern amongst regulatory bodies across the globe regarding the long-term efficiency of the industry.
If nothing else, this high-level debate showcased the fact that banks, regulators, and global financial institutions, corrupt as they may be, are paying close attention to cryptos and blockchain tech.