Managing Director of IMF, Christine Lagarde calls for strict monitoring of the developments in financial technologies and cryptocurrencies because they largely disrupt banking system. In an interview to CNBC, she said pressure from cryptocurrencies and financial technologies, commercial banks are changing their business models.
According to Lagarde, the disruptors like assets, crypto, currencies or other distributed ledger technologies are shaking the banking system. Various payment systems are being developed digital platforms. They are giving stiff competition to the fintech apps of a previous generation.
Popularity of wallets
The popularity of projects like crypto.com is on the rise. The transactions of Bitcoin (BTC) are estimated at 400 million. It is also noted that the use of wallets is increasing considerably. Digital currencies can no longer be treated as anonymous payments system. The projects involving digital currencies require KYC. They require strict enforcement of antimoney laundering.
Lagarde said “We don’t need innovation that destabilizes the banking system” during a meeting of the International Monetary Fund in Washington. She calls for imposing strict regulations on cryptocurrencies. Digital assets made way into the mainstream during the past few years. Meanwhile, the central banks are engaged in the digital currencies.
The Central Bank in Europe is of the opinion that slow moving Bitcoin cannot handle the huge volume of financial transactions. Moreover, Digital assets are not considered as legal currency in most of the jurisdictions worldwide. It is being treated either as securities or commodities.
Startups eyes banking sector for disruption
To expedite payments, the central bank is planning for modification of SWIFT internet banking system. The networks of Stellar and Ripple are being tested by few banks for inexpensive and faster interbank transfer. No control is imposed on the decentralized Bitcoin by the banks. The issue of digital tokens or coins depends on the use case and predetermined.
Tech giants like Apple Inc. (NASDAQ:AAPL) has introduced a credit card in alliance with Goldman Sachs in March 2019. Facebook, Inc. (NASDAQ:FB) is planning to launch cryptocurrency on its own. They feel that it is time to disrupt the multi-trillion dollar banking system. Banks are attempting to embrace the new technology. To facilitate settlement of payments instantly, JPMorgan is conducting a trial of JPM Coin.
