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Central Banks Say The Quiet Part Out Loud

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Jerome Powell and Christine Lagarde don’t agree on every point during their IMF “debate.” We analyze how globalization affects Europe and the U.S. differently.

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In this episode of the “Fed Watch” podcast, Christian Keroles and I discuss our thoughts on the IMF debate that took place on April 21, 2022, between Federal Reserve (Fed) Chair Jerome Powell; European Central Bank (ECB) President Christine Lagarde; International Monetary Fund (IMF) Managing Director Kristalina Georgieva; Indonesian Finance Minister Sri Mulyani Indrawati; and Barbados Prime Minister Mia Mottley.

Fed Watch is a podcast for people interested in central bank current events and how Bitcoin will integrate or replace aspects of the legacy financial system. To understand how bitcoin will become global money, we must first understand what’s happening now.

Takeaways

First, I must preface my write-up by saying that this was not a debate at all. These financial bureaucrats were simply using this forum to get their message across to the people of the world. They all basically agreed on the major points, those being: inflation is high and we can blame Russia for much of the problem due to supply shocks.

The major theme from Lagarde and Powell was, to get the consumer price index (CPI) back into their acceptable range of 2%, they must rein in demand in their respective economies, since the driving force of the rise is due to a supply shock.

The medium is the message as the saying goes. Although this event is meant to portray a united front for the global financial system, we pick out several very important places where Powell and Lagarde disagree once you dig a little deeper.

ECB And Fed On Inflation

Lagarde breaks down the components of the high CPI rate of change in the eurozone by saying energy increased by 44% year-over-year and constitutes 11% of the index, and another significant portion is due to food prices — core CPI (CPI excluding energy, food and alcohol) increased by only 2.9%. I know that most people in the Bitcoin space don’t accept the importance of Core CPI and think it is a scam to hide actual inflation. But in this case, Lagarde has a point. Most of Europe’s price increases are due to a self-imposed supply shock.

Powell talks about the U.S. CPI differently. He acknowledges the supply shock aspect, but his main view of the supply side of things is that the U.S. economy is red hot and its labor market very tight. He mentions the labor market multiple times, claiming supply cannot keep up with rising demand, as opposed to Europe where supply is being cut relative to demand.

Keroles and I react to these two viewpoints of the central bank chiefs.

The Sunset Of Globalization

We emphasize another very important exchange from the IMF roundtable when the moderator asks about the decline in globalization. Powell says that it is quite possible that we see a reversal in globalization, while Lagarde “pleads Europe’s case” for a mere revisiting of the terms of trade.

I think this exposes a fundamental difference between these two economies and in the podcast we take time to detail this in more depth. Suffice it to say in this write-up, the U.S. is more self-sufficient and ultimately less concerned about the fate of globalization than Europe. Europe is beholden to the global economy for customers and for energy inputs.

Bitcoin’s Answer To Lagarde and Powell

Being a Bitcoin show, Keroles and I take a lot of time discussing just how bitcoin fixes these problems of the financial system that Powell and Lagarde speak about.

Instead of relying on central planners (who admit to following the market anyway), a Bitcoin system will take much of the complexity out of the process. We will not have the false impression that the expert class knows best and people will be unencumbered by a narrative of inadequacy and inefficiency.

That does it for this week. Thanks to the readers and listeners. If you enjoy this content please subscribe, review on iTunes and share!

This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

IMF Publishes Global Financial Stability Report Discussing Bitcoin

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The International Monetary Fund published a report detailing how Bitcoin disrupts the world order, enables sovereignty amid sanctions, and demands regulatory action.

  • The IMF recently published the Global Financial Stability Report that details a great deal involving the state of the global economy.
  • Subjects discussed in the report include: bitcoin as a means to avoid sanctions, the fragmentation of the old payments and banking infrastructure, and a global call to action for the regulation and control of assets like bitcoin to prevent further systemic degradation.
  • “The IMF says that “strengthening macroeconomic policies is necessary” to fend off “cryptoization risks.”

The International Monetary Fund (IMF) recently published the “Global Financial Stability Report” which discussed a myriad of subjects including: Bitcoin and other cryptocurrencies disrupting the payments system, bitcoin being used to evade sanctions, inflation, Russia’s invasion of Ukraine, banking infrastructure, central bank challenges of maintaining credibility, energy security, and many other topics.

One clear point of concern for the IMF is the reverberations felt across the world from the invasion of Ukraine. The report states that through poor market liquidity, counterparty risks, funding strains and the overexposure of financial institutions being strangled throughout the invasion, these conditions led to “cryptoization,” or what many Bitcoiners would refer to as hyperbitcoinization.

The result of the invasion led to an influx of bitcoin and other cryptocurrencies flooding into the hands of those that needed it most. Many companies have taken their own initiative to further the amount of bitcoin donations, such as Bitcoin Magazine. Ukrainian reliance on outside funding has shown the fragility of the current monetary and payments system, as bitcoin was capable of offering instantaneous relief. The report states:

“Capital markets might become more fragmented, with possible implications for the role of the US dollar. And the fragmentation of payment systems could be associated with the rise of central bank digital currency blocs.”

Not only can payment disruptions happen with bitcoin, but the IMF is also concerned about the quantity of central bank digital currencies (CBDC) being developed. As the system fragments and central banks become even more autonomous, the current banking infrastructure is left in a deluge of exponential technological advancements cascading into a game of keep up.

This fragmentation increases in severity as nation-states begin to act outside the purview of the established world order. El Salvador started an initial chain-reaction in 2021 that led to explosive growth in the Bitcoin network as it made bitcoin legal tender, but the international geo-political stage of 2022 belongs to Russia. One primary concern listed in the report for the IMF is nation-states like Russia utilizing protocols such as Bitcoin as a way of skirting economic sanctions:

“Over time, sanctioned countries could also allocate more resources toward evading sanctions through mining. Mining for energy-intensive blockchains like Bitcoin can allow countries to monetize energy resources, some of which cannot be exported due to sanctions.”

The IMF notes that the monthly average revenue for all bitcoin mining for last year equated to $1.4 billion. They estimate that Russian miners could have captured up to 11% of that and Iranian miners may have captured up to 3%. While economic sanctions may slow down the pace of the Russian ruble, bitcoin historically appreciates in an extreme manner allowing participants in the network to not only function in the crumbling financial system of the world order, but profit. The report states:

“To fend off cryptoization risks, strengthening macroeconomic policies is necessary but may not be sufficient given the unique challenges posed by the crypto ecosystem.”

The IMF mentions that central bank digital currencies may stagnate some of the growth being experienced by bitcoin and other cryptocurrencies with the emergence of central bank digital currencies. This opinion is based on the assumption that CBDCs will function as a superior monetary network, thereby taking away some of the demand from other currencies. The report then calls for global cooperation and precise actions from lawmakers to prevent further fragmentation of the global payments infrastructure.

The main takeaway from this report should be that Bitcoin has fragmented the world order with a superior payment network, and the old guard is nervous.

Indian Government Consulting With IMF, World Bank on Crypto Policy

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Indian Government Consulting With IMF, World Bank on Crypto Policy

India’s government is consulting with the International Monetary Fund (IMF), the World Bank, and Indian regulators in order to form the country’s crypto policy. “We have reached out to institutional stakeholders within the country and outside. We are taking inputs from the IMF and the World Bank and incorporating these,” said an official from the Indian ministry of finance.

Indian Government in Talks With IMF, World Bank, RBI, SEBI on Crypto Policy


Indian finance ministry officials are discussing a framework for cryptocurrency with various stakeholders including the International Monetary Fund (IMF), the World Bank, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India (SEBI), the Mint publication reported Thursday.

“We have drafted a consultation paper on cryptocurrency,” one of the officials revealed, elaborating:

Now, we have reached out to institutional stakeholders within the country and outside. We are taking inputs from the IMF and the World Bank and incorporating these.


“We will update the consultation paper based on that, and based on the responses by the RBI, SEBI, we will be updating it,” the official added.

The finance ministry’s consultation paper, which is expected to be finalized in the next six months, will cover how to deal with cryptocurrency, related risks, and its treatment as an asset class, the publication conveyed, noting that it will form the basis for India’s crypto policy.

Indian Finance Minister Nirmala Sitharaman has said on several occasions that the government has not decided whether to regulate or ban crypto. However, in the meantime, crypto income will be taxed at 30% and a 1% tax deducted at source (TDS) will be levied on all crypto transactions.

The IMF’s mission chief for India, Nada Choueiri, told the publication that crypto assets posed significant risks, including to financial stability. Without commenting on India’s crypto policy specifically, she opined:

Crypto assets can also be misused for money laundering, terrorist financing, and other illegal activities. Unless effective regulatory measures are implemented, the crypto assets ecosystem could face serious consumer protection challenges such as fraud and cyberattacks.

She added that the IMF is also consulting with other countries to establish an effective policy on crypto assets.

IMF Deputy Managing Director Gita Gopinath recently said that a lot more work is needed on the regulatory front on crypto and digital money. She added, “We’ve certainly seen an increase in the use of cryptocurrencies” before the Russia-Ukraine war, emphasizing that “it happen more in emerging markets than in others.”

Gopinath said in December: “Regulation is absolutely important for this sector. If people are using this as an investment asset, then the rules which are there for other investment classes should apply here as well.”

Furthermore, Bloomberg reported Friday that India will frame legislation for cryptocurrencies only after a global consensus is reached on crypto assets.

What do you think about the Indian government consulting with international organizations on crypto? Let us know in the comments section below.

IMF: We Need a Lot More Work Done on Crypto Regulation

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IMF: We Need a Lot More Work Done on Crypto Regulation

The International Monetary Fund (IMF) says a lot more work needs to be done on crypto regulation. “We’ve certainly seen an increase in the use of cryptocurrencies before this war, and we’ve seen it happen more in emerging markets than in others,” said the deputy managing director of the IMF.

IMF Chief Kristalina Georgieva Pushes for Harmonized Crypto Framework

The top two leaders at the International Monetary Fund (IMF) discussed crypto regulation on the Foreign Policy Live podcast, published last week. IMF Managing Director Kristalina Georgieva and Deputy Managing Director Gita Gopinath were asked how governments should respond to the growing number of challenges facing the global economy, including cryptocurrency.

Georgieva explained that the IMF separates digital assets into three types: “crypto assets like bitcoin,” stablecoins, and central bank digital currencies (CBDCs). Regarding crypto assets, she said:

Time has passed to have regulatory frameworks that are as much as possible harmonized around the world.

“And I do hope that what we now see that there may be more attention to this topic translate into appropriate policy action,” Georgieva added.

As for stablecoins that are “backed by assets,” the IMF chief said, “if they’re properly regulated, they can play a very positive role.”

Georgieva further noted that a key role for the IMF is “to build tunnels that connect these different CBDCs to make that fragmentation less damaging for the world economy or even minimize it.”

IMF’s Deputy Managing Director Sees More Work Needed on Crypto Regulation

Gopinath, an Indian-American economist, has served as the IMF’s first deputy managing director since Jan. 21 this year. She was the IMF’s chief economist between 2019 and 2022.

Commenting on crypto adoption, she said:

We’ve certainly seen an increase in the use of cryptocurrencies before this war, and we’ve seen it happen more in emerging markets than in others.

Gopinath added: “I think parts of the world where there’s less financial inclusion, where people have less access to more regular forms of credit, cryptocurrency and other related forms of digital currencies can start playing a very important role.”

Regarding how much more crypto is being used due to the Russia-Ukraine war, the IMF deputy managing director admitted: “We don’t really have a clear picture at this time of how much of this particular war has triggered an increase in the use of cryptocurrencies, it’s not an easy picture to put together.” However, she noted: “But we are tracking this very closely, and I think in terms of the implications for the global economic order, I think that it’s fair to say that the recent events will accelerate consideration of central bank digital currencies more widely around the world.”

Gopinath continued, “We need to be particularly careful of the regulation that’s needed to ensure that the new forms of digital money don’t lead to evasion of capital risk flow restrictions, especially for emerging and developing economy,” concluding:

I think we need to have a lot more work done on the regulatory front on crypto and digital money.

What do you think about the comments by the IMF’s top leaders? Let us know in the comments section below.

Report: Morocco Central Bank Discusses Crypto Regulation Best Practices With IMF and World Bank

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The Moroccan central bank is currently holding talks with multilateral lending institutions and other central banks, centered on establishing cryptocurrency regulation best practices.

Inevitable Adoption of Cryptocurrencies

The Moroccan central bank governor, Abdul Latif Al Jawhari, has said his institution is currently in discussion with the International Monetary Fund (IMF) and the World Bank, about crypto regulation best practices, a report has said.

In addition to the two international financial institutions, the Central Bank of Morocco (CBM) is also in talks over the same matter with central banks from France, Sweden, and Switzerland.

According to a report by Unlock Media, Al Jawhari’s remarks concerning cryptocurrencies come on the heels of increased calls for authorities to regulate the crypto industry. Despite acknowledging the seemingly inevitable future adoption of cryptocurrencies by Moroccans, the CBM governor asserts that this should only happen when a regulatory framework is in place. Al Jawhari explained:

Currently, we cannot adopt cryptocurrencies given the lack of regulatory and legislative frameworks both nationally and internationally. The G20 and many countries stress the importance of having a crypto regulatory framework as well as a regulatory framework for Central Bank Digital Currencies [CBDC].

Moroccan Crypto and CBDC Regulatory Framework

In order to prepare Morocco for the inevitable adoption of cryptocurrencies, Al Jawhari is quoted stating that the CBM has since created a council that will “oversee the required regulations for both cryptocurrencies and CBDCs.”

According to the Unlock report, the council, which is headed by Al Jawhari, was created in February 2021. Its goal has been to study the implications for Morocco should the decision to adopt cryptocurrencies be made.

Despite the government’s anti-crypto stance, Morocco recently became North Africa’s leading peer-to-peer crypto trading region. Also, as reported by Bitcoin.com News, Morocco has the fifth-highest proportion of the population that owns cryptocurrencies in Africa.

What are your thoughts on this story? Tell us what you think in the comments section below.