Christine Lagarde, head of the International Monetary Fund (IMF), said during Bank of England’s conference that “Instead of adopting the currency of another country – such as the US dollar – some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0. So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy while being open to fresh ideas and new demands, as economies evolve.”
Furthermore, the IMF has recently issued its report pertaining to developments in the Fintech industry, whereby recommendations on the effective regulation of digital currencies and distributed ledger technology (DLT) were given.
It also encouraged policy makers to experiment with Blockchain, governments to develop a regulatory framework for DLT, and financial institutions to integrate DLT within their operations.
This pushed the possibility of having an international cryptocurrency in response to the Bitcoin.
However, a globalized digital currency would face the challenge of centralization, as it requires the IMF to fix and regulate values to manage the flow of money in and out of different countries. This would be in opposition to the decentralization principle behind Bitcoin.
In addition, the IMF coin could replace the dollar as the reserve currency, if it is globally accepted, restricting the usage of national currencies to local markets.