International Institutions Radically Change Attitudes towards Cryptocurrencies

International Institutions Radically Change Attitudes towards Cryptocurrencies

International institutions have radically changed their positions towards cryptocurrencies, whether supporting or rejecting the industry. Even, some experts viewed cryptocurrencies as a ‘safe haven’, which is considered a radical change in itself.

Developments of Cryptocurrencies Over Past 2 Years

A study conducted by a group of experts two years ago about the world’s position towards cryptocurrencies advised investors to be cautious about cryptocurrencies, especially Bitcoin that involves risks, instability and extreme fluctuation in prices.

The current developments of crypto space

Currently, countries are competing for issuing a central bank digital currency (CBDC) to keep abreast of the latest technological developments.

Change in position

The international institutions, especially the monetary agencies, have radically changed their positions towards cryptocurrencies.

International Monetary Fund

In March 2018, Christine Lagarde, managing director of the International Monetary Fund (IMF), said:

“The same reason crypto-assets—or what some people call crypto-currencies—are so appealing is also what makes them dangerous. These digital offerings are typically built in a decentralized way and without the need for a central bank. This gives crypto-asset transactions an element of anonymity, much like cash transactions.”

“The result is a potentially major new vehicle for money laundering and the financing of terrorism,” she added.

In November 2018, Lagarde, however, wrote an article titled: “The Case for New Digital Currency

“Let me start with financial inclusion, where digital currency offers great promise, through its ability to reach people and businesses in remote and marginalized regions. We know that banks are not exactly rushing to serve poor and rural populations,” she said.

World Bank

In February 2018, Jim Yong Kim, President of the World Bank, said:

“In terms of using Bitcoin or some of the cryptocurrencies, we are also looking at it, but I’m told the vast majority of cryptocurrencies are basically Ponzi schemes.”

In April 2019, both the World Bank and IMF have launched a “Learning Coin”; a so-called quasi-cryptocurrency.

Although this token will just be available in the two institutions, this is considered a radical change in their positions. Thus, the mere acknowledgment that the cryptocurrency has some advantages is considered a moral support for the industry.

Arab Monetary Fund and Digital Currencies

The aforementioned study revealed last February that Arab Monetary Fund’s chairman stated, during opening session of the 41st session of the Arab Central Banks Governors,:

“The recent massive use of virtual currencies poses challenges to the central banks of Arab countries.”

While in its 43rd session of the Arab Central Banks Governors held in September 11, 2019 most of members’ discussions concentrated on:

“The opportunities offered by digital currencies in enhancing financial inclusion, fighting corruption and money laundering, developing electronic payment platforms and improving liquidity management.”

Countries’ Change in Position Towards Digital Currencies

In the following lines, we will review the position of some countries towards digital currencies in the past, and the position of these countries recently.

Saudi Arabia: In the beginning of 2018, the Kingdom banned digital currencies’ transactions, while in 2019 it announced that it is studying the issuance of a common digital currency with the UAE, under the name “Aber”, although it has not been launched yet.

The UAE: Despite the practical recognition of digital currencies in the UAE since 2016, the Dubai’s Museum of the Future announced the establishment of the International Council for Digital Transaction.

However, in February 2018, the UAE Securities and Commodities Authority warned against investing in digital and crypto assets.

Whereas, at present, cryptocurrencies are used for exchange between individuals and companies. An example of this is Fam Properties offers secure cryptocurrency payment options for real estate buyers.

Japan and China’s Position

Japan: Despite legalizing Bitcoin as method of payment in the country, the currencies themselves did not find acceptance among society.

While, at the present time, Japan sees the need to accelerate the launch of a digital currency, especially as its rival, China, is striving to launch its own currency as soon as possible.

Kozo Yamamoto, head of the Banking and Financial Systems Research Committee of the Liberal Democratic Party, says Japan should launch a digital yen within the next 2-3 years.

China: Till the end of 2017, China was considered the biggest Bitcoin market, just before banning transactions, considering it illegal and made it illegal and one of the ways to smuggle capital, among others.

 However, after the outbreak of Coronavirus, a Chinese government official said that the spread of the virus may delay the launch of the Chinese digital currency.

Thus, even if the state criminalizes dealing in digital currencies, this launch is a practical endorsement of the idea.

US Position:

The United States of America: Despite its constant position towards digital currencies and its announcement more than once of tracking people who trade or promote cryptocurrencies.

However, during testimony before Congress mid-February 2020, Federal Reserve Chairman Jerome Powell is studying closely developing a central bank digital currency (CBDC).

This was a quick review of changes in the position of some institutions and countries regarding digital currencies, especially during the recent period, as those currencies witnessed a qualitative shift in the past two years.

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