Gita Gopinath, the IMF’s first deputy managing director, says that currencies other than the US dollar may start to dethrone other currencies.
In one of the interviews with the Financial Times, IMF’s top official Gita made this statement. The ongoing Russia – Ukraine war has paved the way for fragmentation in the global financial system.
She said that the “unprecedented financial sanctions imposed on Russia after its Ukraine invasion are gradually diluting the US dollar’s dominance, which might fragment the international monetary system.”
The top IMF official also called for international regulation of digital finance. She predicts that the current situation amidst Russia and Ukraine will lead to the adoption of cryptocurrencies, stablecoins, and CBDCs.
Measures inflicted by western countries on Russia “could encourage the emergence of small currency blocs based on trade between separate groups of countries,” she said.
She added to her conversation that even if there is fragmentation at the minor level, the dollar will remain the major global currency.
It is necessary to highlight that Russia has strived to reduce its dollar dependency. But still, Russia was holding a fifth of its foreign reserves in dollar-denominated assets.
The IMF official said that the greater attention toward other currencies would extend the need for a “comprehensive, consistent, and coordinated” strategy to harness the advantages of crypto’s underlying technology. At the same time, it is necessary to mitigate some of its risks.
Did IMF fail to see crypto’s role amidst the war?
While government agencies definitely have the slightest fear of cryptocurrencies and digital assets, one can never ignore their importance.
The Ukrainian government revealed that it had received more than $60 million of its $200 million goal as of March 23. Alex Bornyakov, the country’s deputy minister for digital transformation, said, “Today, crypto plays a significant role in Ukraine’s defense.”
When the entire people of the country were left out from accessing banks or other financial institutions, the only thing that came to the rescue was crypto.