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IMF supports the digital currency issued by the State | Business

The cryptocurrencies are collapsing. The Bitcoin market leader this week fell below $ 5,000 for the first time in over a year.
On Wednesday it traded around $ 4,000 before recovering to $ 4 500 on Wednesday, down from $ 20,000 high in December.

The cryptocurrency sector has lost over $ 660 billion since its January peak, according to CoinMarketCap.com, Bloomberg reported this week.
Bitcoin is down more than 70% from its December 2017 high, data show, he said.

The current price is lower than the US mining cost of a Bitcoin, $ 4 758, as calculated by the Elite Fixtures research house in March of this year.

At this level, the Bitcoin miners turn off their machines because it costs more to extract the coins than they are worth, with critics predicting that while the bubble continues to burst, the coins will soon be at their true value: zero.

For the believers of Bitcoin, cryptocurrencies are the future of commerce, the digital money that lives on a ledger distributed outside the control of the monetary authorities. Cryptocurrencies are seen by their supporters to have a true value rather than a legislative one (or fiat) and are global, transcending national boundaries.

Critics, however, have emphasized until these coins have been around that have no real value except for those who want to illegally trade in drugs or recycle money. Bitcoin does not have much more to do with these critics. Few large retailers accept Bitcoin, mainly due to its volatility; it offers no advantage in terms of cost or transaction speed on credit cards and is controlled by a small group of unelected people who make decisions such as allowing other currencies to divide or "forge" from the main currency, critics say.

As more and more miners have pursued this virtual gold, cryptocurrencies have used alarming amounts of electricity, using what some countries do.

Crypto has attracted many more disputes over regulation, including the continuing allegations that fraud is rampant and widespread.

A key differentiator between traditional currency, banknotes and coins, as provided by central banks, and Bitcoin is that the latter is designed to become scarcer – and therefore more valuable – over time. This growing scarcity has encouraged miners and speculators, but it is not possible to manage a monetary system.

Money as a medium of exchange must be readily available to those who want to make transactions. It should not be insufficient so that scarcity encourages hoarding and speculation. Central banks ensure that there is sufficient money available to make the economy work; they would not want the value of their notes to be pushed because of scarcity.

Crypto may be in trouble, but the International Monetary Fund (IMF) in the person of its chief executive, Christine Lagarde, threw its weight behind a new digital currency of the central bank last week. Speaking in Singapore, Lagarde said the fintech revolution is questioning the role that the state should play in providing money.

"A new wind is blowing, that of digitization.In this new world, we meet everywhere, at any time.The city square is back – practically, on our smartphones.We exchange information, services, even emojis, instantly … peer to peer, from person to person.

"We go through a world of information, where data is the" new gold ", despite growing concerns about privacy and cyber security."

Money itself is changing, said Lagarde. "We expect it to become more practical and user-friendly, perhaps even less serious.We expect it to be integrated with social media, readily available for online and person-to-person usage, including micro-payments. naturally, we expect it to be cheap and safe, protected against criminals and prying eyes ".

The demand for money is diminishing, he said. "Already the signs in the shop read" cash not accepted. "Not just in Scandinavia, the poster child of a cashless world, even in various other countries.

"Think of the new providers of specialized payment services that offer electronic money – from AliPay and WeChat to China, to PayTM in India, to M-Pesa in Kenya.These forms of money are designed with the digital economy in mind. what people require and what the economy requires ".

Lagarde acknowledged that cryptocurrencies like Bitcoin, Ethereum and Ripple are competing for a place in the cashless world "reinventing themselves constantly in the hope of offering a more stable value and a faster and more economic settlement".

Although there is a discussion about the state of backing down and trusting technology to lead the way, and technology experts can trust these services, Lagarde said that the proper regulation of these entities remained a mainstay of trust.

He asked if the state should not go further: "Beyond regulation, the state should remain an active player in the money market? Central banks should issue a new form of digital money, a state-backed token, or perhaps an account held directly at the central bank, available to individuals and businesses for retail payments? "

Although deposits in commercial banks are already digital, this would be a digital currency that is a state liability, like money today, not a private company, he said.

The suggestion would be for central banks to provide digital currency in the same way that they provide money and coins, but perhaps directly through an account held at the central bank rather than through intermediaries such as banks.

This provides for a digital currency under the control of the monetary authorities rather than that of the cryptocurrencies like Bitcoin, which have tried to operate independently of the regulators.

Lagarde suggested that central banks could enter into partnerships with the private sector – banks and other financial institutions. "You interface with the client, keep their wealth, offer interest, advice, loans, but when the time comes to deal with it, [the central bank] takes over. "

Central banks around the world are taking these ideas seriously, he said, including Canada, China, Sweden and Uruguay, as well as the International Monetary Fund, which published a document on the pros and cons of the digital currency of the central bank. .

The state, in providing money to the digital economy, could meet public policy goals such as financial inclusion, security and consumer protection, and privacy in payments, Lagarde said.

The digital currency offers great promises in the area of ​​financial inclusion with its ability to reach people and businesses in remote and marginalized regions. "We know that banks are not exactly running to serve the poor and rural populations".

Digital currency can also improve the safety and protection of consumers. "This is really David's argument against Goliath: In the past, coins and banknotes could have controlled the dominant positions of large global payment companies – banks, clearing houses and network operators – offering a low-cost alternative widely available, "said Lagarde.

"Without cash, too much energy could fall into the hands of a small number of outsourced private payment providers." Payments, after all, naturally orient themselves towards monopolies: the more people lent, the cheaper and more useful the service is.

"This means that private companies could safely undervalue to the extent that they do not measure the full cost to the company of a non-payment."

A third advantage of digital currency lies in the privacy domain, Lagarde said. "Liquidity allows for anonymous payments." We reach cash to protect our privacy for legitimate reasons: to avoid exposure to hacking and customer profiling, for example. "

Although a completely anonymous digital currency offered by central banks would be a gold mine for criminals, it is possible to find a compromise between privacy and financial integrity.

"Central banks could design the digital currency so that users' identities are authenticated through due diligence procedures and customer-registered transactions, but identities would not be disclosed to third parties or governments unless required by law," called Lagarde.

"So when I buy my pizza and my beer, the supermarket, his bank and the vendors would not know who they are, the state may not, at least by default, but the anti-money laundering and terrorist financing controls will take place in the background If a suspicion arose, it would be possible to lift the veil of anonymity and investigate. "

The advantage is clear, said Lagarde. Payment would be immediate, secure, economical and potentially semi-anonymous, as you wanted it to be. And central banks would maintain a secure position in payments.

This could provide more competitive conditions for competition and an innovation platform.

"While there are potential negative aspects of the digital currency, such as risks to financial integrity and financial stability, there is also the risk of stifling innovation, the last thing that want, "said Lagarde.

"We should address these risks creatively, how can we mitigate them by designing the digital currency in new and innovative ways? Technology offers a very large canvas to do this.

"The case is based on new and evolving requirements for money, as well as essential public policy objectives.While the case of digital money is not universal, we should investigate it further, seriously, carefully and creatively."

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