The rise of cryptocurrencies offers an important perspective on the successes and the failures of monetary policy, as we detail in our report. Cryptocurrency seems to offer the promise of currency secure from compromise, safe from manipulation by financial institutions and increasing in value at a rapid pace. But, does it really?
Some have suggested that cryptocurrency and blockchain technology may signal the beginning of the fourth industrial revolution: "Speaking as part of the 18th collective study of the Political Bureau of the Central Committee on October 24, 2019 in Beijing, Xi Jinping, President of the People’s Republic of China and General Secretary of the Communist Party of China, said blockchain technology has a wide array of applications within China, listing topics ranging from financing businesses to mass transit and poverty alleviation."
As indicated, we have updated the report to include information on the 10/18/19 session at the World Bank IMF Annual Meeting during which China outlined its plan for using digital currency in Africa and the Caribbean: "Central Bank Digital Currencies in the Caribbean: How Can Public and Private Sectors Work Together."
The report objectively outlines the pros and cons.
These developments have several potential impacts: first, the vast and as-of-yet untapped potential of blockchain technology to transform the social infrastructure and second, the force with which cryptocurrencies may influence the future of monetary policy. These are covered in this report.
The first section of the report describes these technologies. Next, it examines the ramifications for monetary policy. The author's forecast for LIBRA and review of new information from sessions they attended at the Annual Meeting of the IMF/World Bank on the promotion of China's digital currency to certain finance ministers give a unique, useful and objective take on what the future might bring. The author closes with an initial forecast of one possible path for cryptocurrencies and monetary policy.
The Report helps:
- Evaluate global and regional trends in blockchain and cryptocurrency development from objective insight not tied to private or public sector institutional interests.
- Assessment of policy and commercial opportunities. Update strategic data.
- Independently and objectively identify policy drivers in the global cryptocurrency market and consider, in an unbiased manner, prospects for growth in emerging economies.
- Formulate plans on where and how to engage with both policymakers and the cryptocurrency market while minimizing any negative impact.
1. Blockchain Technology
2. Regulatory Concerns
2.1 Criminal Implications and Risks
2.2 Cybersecurity Risks
2.3 Asset Classification Risks
2.4 Taxation Risks
2.6 China's Appeal
2.7 US Takeover of the LIBRA Association
3. The Future of Monetary Policy