The emergence of cryptocurrencies has encountered mixed receptions, especially from the financial sectors. Ms. Christine Lagarde the Managing Director (MD) of the International Monetary Fund (IMF) has come out in defense and support of the virtual currencies. The MD has encouraged the financial sector players to embrace the cryptocurrency. This is because it is in a position to change people’s investment and saving nature.
The MD said that the technologies that have come up in the recent past have helped to transform lives of people. That is one of the main reasons why policymakers should come up with a regulatory framework that reduces risk while encouraging a fruitful creative process. Legarde was addressing attendants at the 2018 Spring Meeting of World Bank and IMF in Washington DC. Cryptocurrencies are a new breed of digital assets supported by blockchain technologies that make their names supporting networks like Ethereum, Bitcoin, and Pay Diamond.
Currently, there are more than 1,600 crypto-assets going around according to Lagarde. They don’t come with immediate shortcomings. This is due to their inability to make quick inroads and small links to the other financial system. But regulators must always keep an eye. This is since the crypto-assets are in a position of dragging trade. Furthermore, they can increase the movement of economic surprises in case they are in cooperated into financial products mainstream. She warned that financial institutions will have challenges with their business models. This is in case there will be a huge shift from the normal currencies towards cryptocurrencies. It might be challenging for Central Bank to act as a lender of last resort in case of the need.
The cryptocurrencies should first get the support and confidence of authorities and consumers before they can change financial activities. This is important since the cryptocurrencies have no boundaries. Therefore international cooperation is vital according to Legard. She added that given the IMF membership which is in 189 countries, it can play an important part by giving advice. It can also offer an event for discussion and partnership in the development of consistency administrative approach. To achieve this there must be a rapid growth in technologies and markets. Initiatives must in place to help in closing the wide knowledge gaps that hinder the close monitoring of cryptocurrencies. Measures and policies must be put in place to help protect market integrity, investors, and consumers.
Cryptocurrencies help in ensuring instant and affordable transactions. People are now in apposition to make overseas payments within a span of one hour. This is as compared to the past where one used to spend days before the transaction is complete. In case private cryptocurrencies remain unstable and risky then the central bank will be forced to offer digital forms of currencies. The idea will be discussed in the coming Global Financial Stability Report. Financial markets can function effectively through the use of DLT or distributed ledger technology. Self-enforcing and self-executing could do away with the need for unnecessary intermediaries. Storing important records in a secure way is one of the important of DLT technology. Healthcare startups are working out ways on how to use the technology to maintain private medical records while giving access to authorized users and insurers.
Initiatives such as technologies can be used to offer property security in developing countries. Furthermore, it can be used to raise market confidence and encourage investment. Many disputes have been recorded in line with property ownership in Ghana. But Bitlandpromises a platform based on DLT helps to solve the problem by securely recording land sales.
Cryptocurrency is changing many things in Ghana. It has helped in offering business opportunities and jobs to many people. The Finchcoin is the first ever official cryptocurrency in the country. It has received a good reception by the users. This means the country will get cryptocurrency exchanges, crypto bonds, a Finchcoin-based bank, and a crypto mining station. The Token Media’s CEO Elisha Owusu Akyaw is one of the beneficiaries of the growth. Akway who is 16 years of age is the youngest entrepreneur in Ghana. His company has recorded major transactions by the use of blockchain technology. But this has been through the effort of a number of players. Token Media has recorded more than $40 million sales of tokens.
The birth of Finchcoin has indicated a change in the sector given the countries attitude towards cryptocurrency. Ghana government has had a strong stand against the use of cryptocurrencies. But now it is encouraging people to use it. The government is only after regulation of the crypto-asset. Akyaw believes that the use of cryptocurrency will give the continent a different look.