close

IMF 'Unable' to Supply the Currency Needed to Counter Speculative Attack Using Bitcoin

November 17, 2015

​While bitcoin presents no immediate risk to the International Monetary Fund (IMF), the potential risk will increase as people grow in understanding of digital currency’s benefits, Fenwick litigator Nicholas Plassaras wrote in the Chicago Journal of International Law. Brave New Coin, a data and research company that provides digital currency insights, quoted Plassaras’ thinking on the concerns inherent in the possible shift to digital currency and the need to prepare.

"If the future of e-commerce entails a transition to digital currencies, it is critical that our economic, political and legal institutions are prepared,” Plassaras said. “Bitcoin and other digital currencies like it are projected to become important players in the future of ecommerce. The time to consider how to prepare for that future is now before practical problems arise."

Plassaras focused in particular on the problems bitcoin presents to the IMF. Established in 1945, the IMF maintains the stability of the global economic system through regulating exchange rates. The agency facilitates fair transactions between countries.

He cautioned that the IMF may be unprepared for the digital currency’s increased use in the foreign exchange market. For example, it seems the agency would currently be unable to respond to a speculative attack from bitcoin users. In such attacks, domestic and foreign investors sell a country’s currency assets on a huge scale.

As the Articles of Agreement do not allow the agency to directly acquire bitcoins, according to Plassaras’ analysis, the IMF will not be able to alleviate the country’s currency loss by loaning bitcoin to the nation.

To gain bitcoins, the IMF would have to change the Articles themselves, Plassaras said. However, it will still be difficult for the IMF to amass the volume of bitcoin needed, he added.

The full article is available through the Brave New Coin website​.