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.
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.