Christine Lagarde, the head of the International Monetary Fund, has a message for the world’s central bankers: Don’t be luddites.

Addressing a conference in London on Friday, Lagarde said virtual currencies, which are created and exchanged without the involvement of banks or government, could in time be embraced by countries with unstable currencies or weak domestic institutions.

“In many ways, virtual currencies might just give existing currencies and monetary policy a run for their money,” she said. “The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.”

The most high-profile of these digital currencies is bitcoin, which like others can be converted to cash when deposited into accounts at prices set in online trading. Its price has been volatile, soaring over recent years but falling sharply earlier this month on reports that China will order all bitcoin exchanges to close and one of the world’s most high-profile investment bankers said bitcoin was a fraud.

For now, Lagarde said, digital currencies are unlikely to replace traditional ones, as they are “too volatile, too risky, too energy intensive and because the underlying technologies are not yet scalable.”

High-profile hacks have also not helped, she noted. One notable failure was that of the Mt. Gox exchange in Japan in February 2014, in which about 850,000 bitcoins were lost, possibly to hackers. Following that, Japan enacted new laws to regulate bitcoins and other cryptocurrencies.

But in time, she argued, technological innovations could address some of the issues that have kept a lid on the appeal of digital currencies.

“Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays, so I think it may not be wise to dismiss virtual currencies,” Lagarde said.

Lagarde’s comments appear at odds with the views of JPMorgan Chase CEO Jamie Dimon, who this month described bitcoin as a fraud and said he’d fire any of his traders if they caught dealing in the digital currency.

In a speech laying out the potential changes wrought by financial innovations, Lagarde also said that over the next generation, “machines will almost certainly play a larger role” in helping policymakers, offering real-time forecasts, spotting bubbles, and uncovering complex financial linkages.

“As one of your fellow Londoners – Mary Poppins – might have said: bring along a pinch of imagination!”

Russian ban?

Alexey Moiseev, the deputy finance minister of Russia, said earlier this week that he expects pending legislation on cryptocurrencies will feature a ban on payments made in cryptocurrency.

According to the state-backed news source TASS, Moiseev – who previously said that bitcoin should be classified as a kind of asset in Russia and limited to qualified investors – told reporters on Monday that “no regulator doubts that payments will be banned.”

That comment aside, further statements from Moiseev on the matter suggest that the question is still an open one subject to debate in the State Duma, Russia’s national legislature.

“The discussions will continue. I think that within the framework of these discussions we will decide what we will do with it,” he said, going on to remark:

“In any case, there is a market. It is developing rapidly, and there are certain advantages that could be used. I mean the advantages associated with attracting investments for projects through the ICO. I have a positive attitude to this, but there is another point of view. In order to make a decision, consensus will be necessary.”

Moiseev said that he expects a long-in-the-crafting bill to be completed in October, though given past developments in Russia, the bill could conceivably see further delays. Even still, the deputy finance minister indicated that further deliberations in the Duma will decide what ends up in the finalized measure.

“I think we will determine it within a month. I think in October, and then we will discuss it before submitting it,” he said.


Arthur Levitt, a former chairman of the U.S. Securities and Exchange Commission, said on Thursday he believed the regulator was ill equipped to deal with bitcoin, the digital currency that has seen a meteoric price rise, prompting concerns of a bubble.

“I think the tendency of the Commission has been to stay away from bitcoin,” Levitt said at The Economist’s Finance Disrupted conference in New York.

“They have too many other issues that they are dealing with now that they don’t want to take on something as complex from a regulatory point of view as bitcoin is,” said the SEC’s longest-serving chairman, who held the post from 1993 to 2001.

Digital currencies can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government.

Levitt’s comments came a day after Grayscale Investments LLC said Intercontinental Exchange Inc’s NYSE Arca exchange withdrew a request with the SEC to list its Bitcoin Investment Trust.

Grayscale, the fund’s issuer, noted that earlier this year, the SEC rejected two similar applications for exchange listings of digital currency products.

“Although digital currency market regulation continues to rapidly evolve, at this time Grayscale does not believe there have been enough regulatory developments to prompt the SEC to approve the … application,” Grayscale said in a statement.

The Bitcoin Investment Trust is currently traded “over the counter,” in less formal, more lightly regulated exchanges than those used for typical stock transactions.

Shares of the trust are trading up 508 percent this year.

The price of bitcoin itself has more than quadrupled in value since December to more than $4,100 (€3470) , prompting Jamie Dimon, the head of JPMorgan Chase & Co, to compare it to the famous tulip market bubble in the Netherlands in the early 1600s.

“It could be at $20,000 (€23,625) before this happens, but it will eventually blow up,” he said earlier this month.

There have also been a number of massive cybersecurity breaches affecting digital currency holders.

Levitt said the Commission, which says its mission “is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation,” clearly should be prepared to regulate bitcoin.

Another factor is that the SEC does not want to get into a battle with state regulators, which have taken the lead on regulating bitcoin, said Levitt.

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