The Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group were held in Washington, DC over the weekend and notably, the subject of bitcoin and its underlying technology was brought up for discussion.
Some participants likened the digital currency to Esperanto, the language created in 1887 to be an international medium of communication, in that it’s a good idea theoretically but that it might not live up to its potential. Others criticised it as a poor store of value, according to a report from Mexican bank Banorte.
The bank reports attendees as saying:
“Nobody believes bitcoin or any of these will take over the world as the next global currency. In this context, some compared this to what happened with Esperanto, taking over the world’s language of choice, which as we all know, has not happened at all.”
However, it also indicates the lending institutions are starting to take notice of bitcoin’s disruptive potential.
The Banorte report says that financial institutions are having to deal with increasingly restrictive regulation, while at the same time they need to tackle new and disruptive technologies, including digital currencies.
“Scepticism about the use of bitcoin and other so-called ‘digital cryptocurrencies’ is all over the place with comments such as ‘stay away from bitcoin … It is a mirage’ or ‘it’s a terrible store of value’, sponsored by Warren Buffet and Jamie Dimon, respectively,” the report states.
Yet, the topic also came up in different agendas during the meeting in a more constructive way.
Benefits in finance
Although panellists do not expect bitcoin to take over the global currency system, they are open to the idea of applying digital currency protocols to develop new platforms and deliver new features.
There was recognition that such protocols could serve as an “initial layer” upon which platforms of fully blown payment systems could be built.
“The main nicety is that this protocol conducts real-time operations, in which value is transmitted, instead of the current use of corresponding banking, representing a liability for one of the counterparties, in both, simple money transfers and FX operations. This reduces transaction costs and counterparty risk,” the bank says.
One example of potential block chain applications in the financial sector is Epiphyte, a crypto-finance platform designed to connect banking networks with cryptocurrency networks. Epiphyte won the SWIFT Innotribe Startup Competition at the Sibos 2014 event in Boston earlier this month.
Summing up, Banorte says the sentiment toward cryptocurrencies was overall balanced:
“All in all, instead of perceiving a full rejection of cryptocurrencies, we observed a much more constructive assessment of these around its operational aspects to build more secure and cheaper-to-use payments systems.”
Image courtesy of IMF