Not to scare away any would be Bitcoin or alternative cryptocurrency investors but …Did you know that we kind of already have a “world” currency?
In the world before cryptocurrencies, the International Monetary Fund (IMF) created a basket of currencies, this aggregated basket currency is called Special Drawing Rights (SDR). The IMF issues the aggregated currency to central banks in need, to support their currency reserves in order to facilitate financial stability.
In many ways, the IMF is the central bank to central banks. When a member country needs financial assistance, the IMF “cuts a check”, known as the SDR.
Stay with me… I know many crypto enthusiasts are getting antsy with all this central bank and fiat currency talk.
The IMF may be warming to the idea of adding cryptocurrencies to the SDR basket. This would be a huge positive catalyst for the cryptocurrency space.
Cryptocurrencies and the IMF
The IMF’s primary purpose is:
To ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The Fund’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.
Let’s pay special attention to the last sentence, “The Fund’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.”
Staying true to its mandate, the IMF is starting to worry about global debt levels. In fact on April 18th in a CNBC interview, Vitor Gaspar, Director of the Fiscal Affairs Department at the IMF, said that governments need to be cutting debt levels NOW.
Given the political environment, I think cutting debt levels (at least in the United States) is highly unlikely.
As you already know, high debt levels over time lead to fiat currency depreciation. In order to hedge the SDR against the decline of the fiat currencies currently in the SDR basket, the IMF will have to warm to the idea of adding non-government backed digital currencies that aren’t linked to the debt/depreciation cycle, to the SDR basket.
Simply put, if the IMF is to achieve it’s central purpose in a world of declining fiat currencies, then it must consider adding cryptocurrencies to the SDR basket.
Completely “over the top” optimism from a biased crypto enthusiast… Right?
I’ll leave you with a statement from Christine Lagarde, Managing Director of the IMF.
“I think we should just be aware of not categorizing anything that has to do with digital currencies in those speculation, ponzi-like schemes,” she said. “It’s a lot more than that as well.” – Christine Lagarde