Today, January 25, 2018, during the Remaking of Global Finance discussion at the World Economic Forum (WEF), in Davos, Switzerland, panelists discussed the current climate of global economics and what the future may hold.
Speakers included IMF director Christine Lagarde; chairman of the Supervisory Board of Deutsche Bank AG Paul Achleitner; chairman and CEO of BlackRock Inc. Laurence Fink; UK chancellor of the Exchequer Philip Hammond; US secretary of the Treasury Steve Mnuchin; as well as professor of economics Jin Keyu. CNBC anchor Geoff Cutmore moderated the panel.
Early on in the discussion, after remarking about his faith in the long-term strength of the US dollar as the reserve currency, Mnuchin quipped:
"You have 53 minutes left if you just want to talk about the dollar ... I do realize there's another really attractive thing to talk about and that's bitcoin and cryptocurrencies."
The treasury secretary later weighed in on a topic that seems to have captivated the world: "My number one focus on cryptocurrencies – and whether that be digital currencies or bitcoin or other things – is that we want to make sure they're not used for illicit activities."
Mnuchin related that, in the US, providers of cryptocurrency wallet services are "subject to the same regulations as a bank." He said that it's important to create unilateral regulations across borders, and acknowledged that many G20 countries had laid the groundwork for this.
"We encourage FinTech, we encourage innovation, but we want to make sure that all of our financial markets are safe and aren't being used for illicit activities," Mnuchin reiterated. These comments fall in line with his previous statements on the subject.
In response to Cutmore quoting French President Emmanuel Macron about the IMF becoming a "super cop" investigating cryptocurrencies, Lagarde acknowledged the usual laundry list of risks people have come to associate with blockchain technology and cryptocurrencies, such as terrorist financing and transaction anonymity.
But Lagarde then steered the topic of discussion to the potential benefits of extending inclusion to many who are being left behind in the financial world:
"I think there is a definition of inclusion that applies to those who are saving in banks rather than investing in assets and securities. I think inclusion is also about the 2 billion people who currently don't have access to the financial markets, who do not have a bank account, who cannot bank and who cannot transact. And I think that what is happening in the various innovation fields that we see in the markets, using mobile, using algorithms that can actually facilitate and reduce the number of intermediaries is actually going to help with the inclusion of those people."
As the IMF's managing director, Lagarde's forward-thinking stance on cryptocurrencies may be the foundation for the agency to consider them as a viable reserve in the not-so-distant future.
Transitioning to investment sentiment, Cutmore asked Fink if any of the $6 trillion under his company's management might be directed to crypto-related endeavors. The CEO was critical of cryptocurrencies as "more of an index of money laundering than anything more than that" but was also quick to acknowledge "it is a real technology" that's created a "fascination with millions and millions of people," and will "transform how we do our business."
Fink rounded out his statements by warning, "We should not turn our back to it, we should embrace and work towards a global solution, because if we don't work towards a global solution it will create systemic risk."
It is noteworthy that this opinion differs from the one previously touted by BlackRock's global chief investment strategist, Richard Turnill.
Chiming in on the discussion, Achleitner, the sole banker among panelists, made a point to distinguish between blockchain technology and cryptocurrencies. He said that currencies require stability, liquidity, and guarantees against forging. He told the audience it is necessary to "look away from the hype."
In closing, Achleitner said that the trend of central banks taking a backseat to cryptocurrency issuance is a "temporary phenomenon" but that does not diminish "the fundamental promises of the blockchain technology."