IMF crypto video shows world leaders are paying attention

22 September, 2020

A number of recent news stories relating to the global crypto market indicate good things may be on the horizon for fans of digital currencies. Cryptocurrency or otherwise, it is clear from the stories that world leaders are paying attention.

Perhaps the recent coronavirus crisis has led to a new awakening of the realities of cryptocurrency. At any rate, the world is closer to a cashless, digital economy than ever before.

Any large-scale move to cryptocurrency or central bank digital currencies (CBDCs) would obviously be good for the online gambling sector. For many operators, the only question is which platform will win out. Will private cryptocurrencies rule the day or will CBDCs merely pick up where fiat cash leaves off?

If the International Monetary Fund (IMF) has anything to do with it, CBDCs will rise to take the place of fiat cash. They recently released a video describing crypto and digital currencies that got quite a bit of reception on Twitter. The video was accompanied by a written transcript originally published in 2018.1

The fact that the IMF felt compelled to create the video shows that its leaders are paying attention. They are not alone. The UK just announced new guidelines that bring cryptocurrencies more in line with fiat in terms of anti-money laundering laws. The EU also recently repeated their desire to put all digital currencies on hold until their central banking authority can come up with a workable regulatory framework.2

More on the IMF video

If you needed a very basic introduction into what cryptocurrency is, the IMF video does the trick. The video starts by discussing the evolution of money as a store of value. It talks about how what we know as modern fiat came to be - from the earliest days of printed and minted currency.

What is most interesting to note is that the video speaks of cryptocurrency in unflattering terms. For example, the video early on describes cryptocurrency's "cult-like followings among the tech savvy." The video even asks the question - and quite sarcastically, at that - if cryptocurrency will ever replace fiat.

Moving beyond the origins of money, the video explores a number of other topics as well. Perhaps most intriguing is the topic of bookkeeping. Therein lies the fundamental difference between fiat and cryptocurrency. In the fiat realm, bookkeeping is the responsibility of countless organizations ranging from banks to payment processors.

Bookkeeping in the cryptocurrency world is left to a decentralized ledger. For example, Bitcoin's ledger tracks every BTC transaction that has ever taken place. Moreover, the ledger cannot be modified. Once a block has been added and confirmed, its data remains forever. No one can 'cook the books' without gaining majority control over the Bitcoin network and replacing the ledger. And that is not likely to happen.

In the end, the IMF video attempts to present an unbiased review of cryptocurrency and its relation to fiat. But it is biased as the IMF takes a decidedly negative stand against crypto. That said, would we expect anything different?

Why it matters

As you might expect, the IMF video generated lots of comments on Twitter. Fans of cryptocurrency pointed to it as evidence that we are moving closer to a cashless global economy. Critics echoed the same arguments that are brought up every time crypto is discussed as a viable fiat replacement. Why does it all matter?

Those of us in the online gambling sector have known the benefits and pitfalls of cryptocurrency for years. Indeed, the online gambling industry was one of the earliest adopters of crypto. Gambling operators are still among crypto's biggest customers.

All of this matters because the rest of the world is just waking up to the realities of cryptocurrency and digital assets. Again, perhaps the coronavirus crisis has heightened awareness. At any rate, the fact that the IMF felt it necessary to create a video to accompany a document that is already two years old indicates that they see the writing on the wall.

The fact that the EU is looking to ban digital currencies within its borders - in direct opposition to Facebook's plans to launch its own coin - is a clear indication they believe digital currencies are the future of money. The UK's new regulations to prevent money laundering in the crypto space is proof that they understand crypto is here to stay.

The market will decide

It is hard to argue that cryptocurrency is just a passing fad. You could make the case that cryptocurrencies will forever remain assets rather than actual money people spend, but it would be a harder case to make given the growing number of businesses now accepting crypto payments. So what we actually have here is a question of which platform will take center stage.

At this point, cryptocurrencies and their digital currency cousins can be divided into two main groups: private and public. Bitcoin, Bitcoin Cash, Litecoin, Ethereum, etc. are all private projects. Bitcoin was the one that started it all.

CBDCs are public projects. To date, Venezuela is the only country to have officially launched a CBDC for everyday use, though the Petro is pretty much useless right now thanks to Venezuela's continued poor economy. Still, other countries are quietly working on their own CBDCs. China is one example. The U.S. and UK are two more.

The case for private crypto

The market will ultimately decide which platform gains the most traction. You could make a case for private crypto in the sense that private platforms take control away from governments and central banks. Private cryptocurrencies level the economic playing field by giving consumers direct control over their own economics.

Cryptocurrencies are also decentralized. This matters when you understand the influence politics have over money. A decentralized form of trade does not give any one nation or government an economic upper hand. It also doesn't allow banks to control economic value, economic freedom, and so forth.

One more thing that private projects have in their favor are the tried-and-true market forces that determine who succeeds and who fails. Those market forces are entirely dependent on what consumers want. The laws of supply and demand that fuel free market forces have a tendency to weed out underperformers in favor of those products and services that perform well. In the end, you get a better cryptocurrency when market forces are allowed to do what they do.

The case for public crypto

Private cryptocurrency eventually replacing fiat is not guaranteed. In fact, private projects have an uphill climb. They are competing with central banks and national governments that have no intention of giving up control over the monetary system. This fact alone makes the case for public currencies replacing fiat cash.

Consumer perception and acceptance is something else public projects - particularly CBDCs - have in their favor. Imagine for one moment that the UK replaced the pound with a new digital currency of equal value. Imagine they encouraged everyone to trade in their paper notes and coins for this digital currency instead.

Are UK consumers more likely to trust the Bank of England (BoE) or Bitcoin? On a one-for-one trade, the BoE has the edge. Consumers are already used to how the central bank system works. They know very little about Bitcoin, so it's a lot easier for the BoE to gain their trust.

Only a matter of time

When you step back and analyze recent news in relation to everything we know about cryptocurrency, it appears to be only a matter of time before paper bills and minted coins are gone. In many places around the world, the coronavirus crisis has led to an inexplicable coin shortage. Could shortages be nothing more than central banks using the crisis as a steppingstone to introducing digital currencies? It is not beyond the realm of possibility.

Assuming it is just a matter of time, the online gambling industry is already well positioned to take advantage of digital currencies. Many online operators run businesses built entirely on technology. They already have the networks and infrastructure in place. Many online casinos already accept cryptocurrency payments from the most popular projects including BTC, LTC, and ETH.

The rest of the world can actually learn some lessons from the gambling industry. One such lesson is that crypto is not to be feared. People are concerned that once the world goes digital, governments will be able to track every penny spent. Well, guess what? Unless you are paying cash for everything, your government can already track your spending habits.

There are definite advantages to crypto and digital currencies ranging from security to better bookkeeping. And of course, there are problems as well. No monetary system is perfect. The fact remains that digital currencies are set to become the next form of money. It is inevitable. The online gambling industry knew that years ago, which is why they were early adopters of Bitcoin payments.

Are you ready for a new economy without printed bills and minted coins? It is coming. The IMF knows it, which is why they produced their recent video and published it on Twitter.

1) IMF. What are cryptocurrencies?

2) ABC News. EU heavyweights seek strict rules for digital currencies