"What is Cryptocurrency?" IMF Releases Educational Video, Upsetting the Crypto Community Again!

The International Monetary Fund (IMF) today released a short video on Twitter explaining what cryptocurrencies are, highlighting that if their high volatility and other shortcomings can be overcome, it could fundamentally change the way people spend, transfer money, and invest.

What is Cryptocurrency?

When it comes to shopping and trading, the majority of people rely on banks or credit card companies to complete transactions. Despite being accustomed to these longstanding traditional financial systems, they still have some issues, including:

• Intermediary fees
• Trust issues with banks
• Time-consuming cross-border remittances

What are cryptocurrencies? https://t.co/ggONlLkA2r pic.twitter.com/yYpj3Jf37E

— IMF (@IMFNews) August 23, 2020

In the video, the trust issues with banks mainly refer to the handling of user data. For instance, Capital One Bank in the U.S. recently faced a penalty of $80 million after an employee illegally accessed data of over 100 million North American customers.

To address these issues, cryptographic, peer-to-peer cryptocurrencies can alleviate these pain points. Firstly, code-based cryptocurrencies exist only on the internet, eliminating the need for intermediaries in transactions.

Additionally, during transactions, all network nodes verify transactions through cryptography, ensuring transaction validity and preventing double spending, resulting in enhanced security.

Moreover, peer-to-peer transactions eliminate intermediaries, leading to faster transaction speeds, lower costs, and the borderless nature allowing people worldwide to participate, even without a bank account, in using cryptocurrencies.

What Risks Does Cryptocurrency Pose?

The video mentions that certain flaws still need improvement, including:

• Anonymity: Potential for criminal use
• Volatility: Sharp fluctuations, less stable than mainstream fiat currencies
• Scalability: Unable to handle large volumes of transactions
• Private keys: Difficult to recover if lost

Furthermore, the fact that cryptocurrencies are far from being widely adopted is highlighted. However, the video concludes on a positive note, suggesting that if these pain points can be addressed, cryptocurrencies could potentially become the "next generation of currency."

Cryptocurrency Community Perspectives

Originally from 2018, the video refers to cryptocurrencies as the "next generation of currency," without explicitly mentioning decentralized ledgers, blockchain, or the names of any cryptocurrencies such as Bitcoin, Ethereum, or Ripple, which only briefly appear for a few seconds when explaining transactions.

The absence of mentioning Bitcoin has sparked dissatisfaction within the cryptocurrency community. Many users believe that Bitcoin's key feature, its unalterable total supply limit, is crucial for its ability to compete with fiat currencies. They also argue that the video deliberately portrays the high volatility of cryptocurrencies as only falling and not rising, overlooking Bitcoin's anti-inflation characteristics.

The community compares this video to a recent advertisement by Grayscale Investments, finding both messages to be equally ambiguous. They question why a 2018 video is being re-released, with some speculating it may be related to the progress of various countries' Central Bank Digital Currencies (CBDCs). Some users urge well-known institutions not to promote virtual assets for investment that may mislead the public.