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Author Topic: 2013-06-09 Regulating CCs: Bringing Bitcoin within the reach of the IMF  (Read 829 times)
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June 10, 2013, 08:46:51 AM

The paper:

What is Bitcoin?
Conceptually, Bitcoin is two things at once. First, it is a digital currency, meaning that the unit of account it employs has no physical counterpart with legal tender status. Second, Bitcoin is what Friedrich A. Hayek described as a “private currency”: a currency provided by private enterprise aimed at combatting government monopolies on the supply of money.

Finding a way to regulate Bitcoin is critical in light of its potential destabilizing effects on the foreign currency exchange. Although there might be a number of ways to mitigate Bitcoin’s impact via domestic legislation, those solutions are beyond the scope of this Comment. Instead, I discuss ways in which the IMF can be used to counter the threat posed by Bitcoin.

The IMF is particularly well-situated to solve this problem for two reasons. First, the IMF is an institution specifically designed to help stabilize the global economic system via the foreign currency exchange, as explained in Section III. Second, regulating Bitcoin falls squarely within the IMF’s goals, as outlined by Article 1 of the Articles of Agreement.147 In both of these respects, the IMF is able to coordinate a global response to the threat posed by Bitcoin in a way no other institution can.

There are, however, challenges that must be overcome. The most obvious obstacle to regulating the impact of Bitcoins on the foreign currency exchange via the IMF is one of enforcement. Article VII of the Articles of Agreement allows the IMF to replenish its holding of a member’s nation currency.148 It also allows the IMF to restrict the flow of a currency it deems to be scarce and to apportion its allocation accordingly.149 Both are vital tools for countering a speculative attack. The first allows the IMF to overcome any currency shortages, ensuring that it has a sufficient amount of currency to lend in an effort to offset a speculative attack. The second gives the IMF the flexibility it needs to respond in the event of an emergency shortage, and allows the member nation whose currency is in short supply to limit the domestic exchange of its scarce currency.
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