The head of the International Monetary Fund (IMF) believes that cryptocurrencies may give traditional government-issued ones a "run for their money."

Speaking at a conference in London, IMF chief Christine Lagarde told attendees that she thinks "it may not be wise to dismiss virtual currencies."

Notably, she outlined possible scenarios in which a country – particularly those with "weak institutions and unstable national currencies" might actually embrace one more directly.

"Instead of adopting the currency of another country – such as the U.S. dollar – some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0," she said.

One of the driving factors behind that potential evolution would be a shift in consumer preference for new currencies that are "easier and safer" than existing ones. That scenario could be further hastened if cryptocurrencies "actually become more stable," she said.

Lagarde went on to say:

That said, Lagarde noted earlier in her speech that such an outcome is, in her view, a distant prospect, saying that cryptocurrencies are "too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable."

To date, the IMF has advocated a balanced approach on cryptocurrency regulation, voicing that position in a January 2016 staff paper. Lagarde has also voiced support for financial applications of blockchain, a subject that the IMF has explored on an organizational level as well.

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