Cryptocurrencies, financial intermediation and AI is slowly working its way into our everyday lives. Some more-so than others. This is done through your wallets, smartphones and the financial systems that we all use. Many people believe that this is just beginning of these three things getting more adapted into our everyday lives. Some people think that these innovations will speed and escalate to a mainstream appeal within the next few years. Cryptocurrencies As many people accept, cryptocurrencies are on a different level to PayPal and other traditional payment methods. They differ because they are on there on their own unit of account and payment systems. These systems allow for peer to peer transactions without central banks and central clearing houses. However, CEO of IMF, Christine Lagarde, believes that Bitcoin and other cryptocurrencies don’t post a threat to the current fiat currencies and traditional financial establishments. Lagarde believes that crypto is:
“volatile, risky, energy incentive and because the underlying technologies are not yet scalable enough.”With some currencies being hacked this makes their point stronger. However, still Lagarde admits that these are challenges with the technology which can be fixed over time and that when tablets and personal computers were first introduced, people dismissed them almost immediately. Dollarization Lagarde then goes to talk about dollarization which was at 20% in 2006 and jumped to 60% in 2008. She describes this as a tipping point but then goes on to say:
“Why would citizens hold onto virtual currencies rather than those physical dollars, physical euros or physical sterling’s. because it may one day be easier and safer than obtaining paper bills, especially in remote regions and because virtual currencies could actually become more stable.
Citizens may one day prefer virtual currencies since they potentially offer the same cost and convenience as [there could be] no cash, no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities.”Lagarde then goes onto say that if privately issued currencies continue to be risky and unstable, the public might call on central banks to provide digital forms of legal tender.