There's a growing accord both within traditional finance and among the forefront of cryptocurrency innovation. Notably, last month, Christine Lagarde, head of the International Monetary Fund (IMF),... delivered a speech in Singapore ...could be chronicled as the historical instance when the 20th century’s experiment with fiat money began to fade.
While dramatic shifts won't happen instantaneously, Christine Lagarde's address underscored the inevitable changes in the current monetary framework. She highlighted critical issues surrounding both the essence of money and banking as we know it.
The Death of Centralized Trust
It is easy to forget that today’s monetary system This shift dates back to 1971, following President Nixon's decision to abandon the gold-convertibility foundation of the US Dollar, prompted by a French gold claim he declined.
Previously, the currency base was comprised of metals—mainly gold and silver, occasionally copper.
In her Singapore speech, Christine Lagarde emphasized that...
...'During times when trade was localized and centered around the marketplace, tangible money, like metallic coins, sufficed and served its purpose well.'
Ms. Lagarde references a bygone era starkly different from our digital age where money exists merely as entries on a bank's computer ledger. Ironically, while established banks criticize digital currencies, they’ve actually been operating similarly for decades.
The current evolution isn't about redefining money's essence—it's about who holds the power to issue it.
Unity in Core Principles
Ripple's CEO Brad Garlinghouse recently tweeted, saying...
...'I couldn't agree more with Lagarde: Money indeed is undergoing a transformation. Digital currencies contribute significantly by tackling financial inclusion while addressing the fractured global payments dilemma. It's logical for Central Banks to engage.'
. @Lagarde ...is notably distinct in the crypto sphere. Unlike platforms aimed at bypassing the established banking network, Ripple collaborates with leading global banks. They also align with R3 ( https://t.co/aFKwrF6Vf9
— Brad Garlinghouse (@bgarlinghouse) December 14, 2018
Ripple ) which includes financial giants like Bank of America, Merrill Lynch, Citigroup, Wells Fargo, BBVA, HSBC, Barclays, and UBS. again Ripple's stance bridges the gap between the traditional financial landscape and the digital realm, where setting up an account takes minutes and global transactions are completed in seconds (on some platforms).
Christine Lagarde eloquently stated, 'We are witnessing the dawn of digitalization—a shift to instant interactions via digital devices. The marketplace is, once again, wherever we choose to meet—albeit virtually, facilitated through our smartphones.'
In her discourse, amid posing numerous thought-provoking queries, Christine Lagarde contemplated, 'We must explore the potential of state-backed digital currency. There could be a governmental role in financially nurturing the digital age.'
Redundant in the Extreme
Is it truly a 'possible' role for the state?
For centuries, governing bodies have steered the direction of currency, but now, technology questions that authority, leading to a potential overhaul of traditional trust in banks and governments.
Presently, people continue to rely on fiat money sustained solely by central-bank assurances. As long as this faith persists, the widespread adoption of cryptocurrencies may not reach the fervor that its enthusiasts anticipate.
Read: The Problems with Fiat Currency
Historically, fiat currency teaches us that creating money from thin air typically returns to its origin. When major fiat currencies like USD, EUR, JPY, and GBP lose their luster, public sentiment towards crypto is likely to shift dramatically.
Nicholas Say, originally from Ann Arbor, Michigan, has roamed the globe extensively, establishing a prolonged residence in Uruguay, and now calls the Far East home. His writings are prevalent online, often focusing on feasible advancements and the forthcoming wave of human innovation.
