According
to the Wall Street Journal, the world may soon have an international
cryptocurrency in response to Bitcoin. The story comes as a response to
recent comments by Christine Lagarde, head of the International Monetary Fund (IMF), encouraging banks and governments to not short-change Bitcoin and other cryptocurrencies.
Global digital currency craze
The news should not come as a surprise, after the recent announcement by the Dubai government regarding its intention to issue a state cryptocurrency. Further, recent news indicates a large number of banks anonymously supporting state-issued coins as the Blockchain hype continues.
Decentralized centrality?
The difficulty with a global digital currency is the centralization
factor. A major part of the appeal of cryptocurrencies like Bitcoin is
the decentralized protocol, creating a truly free market where value is
based purely on consensus without price fixing.
A globalized digital currency, while providing
decentralized security, would require the IMF to fix and regulate values
in order to manage the flow of money in and out of different countries.
Such a system would run contrary to the underlying principles behind
Bitcoin.
New reserve currency
The dollar
as the reserve currency for much of the world’s transactional volume
means that some major global economies may want a new digital currency
to function as the reserve. The IMF coin could potentially replace the
dollar in that context, should it become widely accepted. In such a
case, the dollar and other national currencies would be restricted to
local markets.
Some supporters of Bitcoin would argue that there is no
need for such a currency from the IMF, since Bitcoin already exists, and
without the centralization risks. The greatest hurdle would be Lagarde
and other economists embracing and using Bitcoin globally, but the jury
is still out.
