Some of the biggest reporting around crypto today (aside from Bitcoin’s plunge) is related to the past, specifically the 2008 financial crash.
You remember what happened – the implosion of various banks caused widespread economic panic. The president had to come in and bail out the auto industry. Everybody struggled with the twin scourges of foreclosures and unemployment. It was tough times.
During the crisis, we heard a lot about how banks didn’t do things right – didn’t leverage capital the right way, how subprime exploited vulnerabilities, and how generally, there weren’t the kinds of safeguards in place that you need to keep people’s money safe.
But what if cryptocurrency, a new player on the fintech stage, could eliminate many of the risks that we faced in 2008?
Today Stanley Yong speaking on CNBC’s Squawk Box suggests that very thing.
Yong was talking about central bank digital currencies or CBDCs – coins created by national governments that could play a role in stabilizing market sectors if something like a subprime bubble bursts.
“Combining what central banks have in terms of digital systems for money transfer with the delivery mechanisms for all sorts of commodities, derivatives, and stocks in a blockchain system, flexibly, would be the way we get rid of the kinds of risks we saw in 2008,” Yong said.
Part of this philosophy addresses what’s called a settlement system freeze – where transaction settlements are affected by a lack of confidence.
Well after the bubble burst and the bailouts, government was looking at how to regulate banks better. But they weren’t yet looking at blockchain, which has emerged over the last few years as a major way to reinvent banking – in many people’s eyes, for the better.
The world is looking at cryptocurrency as a tool for anti-money laundering, transparency and anticorruption systems. While there is some back and forth about whether coins are generally a stabilizing or destabilizing factor, there is consensus that resources attached to blockchain systems can help with making transactions transparent.
With that in mind, there’s also other big news today from the International Monetary Fund, a leader in world finance.
In past months, we’ve reported the IMF’s critical eye toward cryptocurrency in general. While the World Bank has been an enthusiastic proponent of using blockchain technologies for trading, the IMF has been reticent at best, and sometimes critical of the destabilizing factor the cryptocurrencies could represent.
However, Cointelegraph reports today that Christine Lagarde, head of the IMF, made remarks at the Singapore Fintech Festival admitting that central bank cryptocurrency systems could be a good thing.
there may be a role for the state to supply money to the digital economy,” Lagarde reportedly said, going along with what many analysts and experts consider to be a very real potential.
Look for more on world governments coalescing around the use of cryptocurrency and how that will move markets: if, as Yong proposes, coins can protect us from another financial crash, that’s icing on the cake.
