Nicholas Plassaras
University of Chicago
April 7, 2013
Chicago Journal of International Law, 14 Chi J Intl L (2013) Forthcoming
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This paper examines the potentially destabilizing effects of emerging digital currencies on the international foreign currency exchange. Specifically, it examines “Bitcoin,” a decentralized, partially anonymous, and largely unregulated digital currency that has become particularly popular in the last few years. The paper argues that the International Monetary Fund, the institution responsible for coordinating the stability of foreign exchange rates, is ill-equipped to handle the widespread use of Bitcoins into the foreign exchange market. It highlights the inability of the Fund to intervene in the event of a speculative attack on a currency by Bitcoin users. The paper concludes by suggesting two interpretations of the Fund’s incorporating document, the Articles of Agreement, which would allow it to intervene in the event of such an attack.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2248419
Gigantic implications for Bitcoin's price and future if this paper leads to any IMF action. On the plus side, Bitcoin could be "legitimized" and become a reserve currency on a par with USD, with its value skyrocketing. On the negative side, once reserves were accumulated by IMF and other central banks, Bitcoin would likely become a "managed" (i.e. manipulated) market in terms of price and supply, somewhat like gold since 1933.
An analysis of above paper, worth reading in its entirety:
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The IMF’s relationship with the bitcoin economy is a most poignant one: the IMF knows that unless it acknowledges bitcoins, it cannot intervene during a speculative attack or some other destabilizing event. While the ethics/behavior of the IMF is beyond the scope of this post, we are well aware of their capacity for nefariousity (see: cyprus). If the need arose for regulation by the IMF, it would require cornering enough of the bitcoin market to make a difference. This, as you can guess, is a double edged sword because it would also give them the power to control the currency.
The IMF has no way of interfacing with bitcoin without completely undermining the decentralization of the bitcoin economy. It would appear that at one point or another this issue will come to a head, and when it does it won’t be pretty. At the moment bitcoin is quite vulnerable if there was a cooperative, concerted effort to undermine its value. Thankfully this appears not to be an immediate concern. But it will become one.
The IMF has no way of interfacing with bitcoin without completely undermining the decentralization of the bitcoin economy. It would appear that at one point or another this issue will come to a head, and when it does it won’t be pretty. At the moment bitcoin is quite vulnerable if there was a cooperative, concerted effort to undermine its value. Thankfully this appears not to be an immediate concern. But it will become one.
https://btcgsa.wordpress.com/2013/06/03/bitcoin-and-the-imf-friends-fornever/