IMF Managing Director urges central banks to think about issuing digital currencies
The International Monetary Fund (IMF) Managing Director Christine Lagarde announced last week that central banks should consider the possibility of issuing digital currencies.
While speaking at the Singapore Fintech Festival, Lagarde noted that digital currencies issued by Central Banks could satisfy public policy goals, such as financial inclusion, security and consumer protection.
“True, your deposits in commercial banks are already digital. But a digital currency would be a liability of the state, like cash today, not of a private firm. This is not science fiction. Various central banks around the world are seriously considering these ideas, including Canada, China, Sweden, and Uruguay. They are embracing change and new thinking – as indeed is the IMF,” Lagarde said.
However, Lagarde is not completely convinced that cryptocurrencies seek to anchor trust in technology. She still thinks that proper regulation “will remain a pillar of trust.”
Lagarde also mentioned the example of new specialized payment providers that offer e-money:
“From AliPay and WeChat in China, to PayTM in India, to M-Pesa in Kenya. These forms of money are designed with the digital economy in mind. They respond to what people demand, and what the economy requires. Even cryptocurrencies such as Bitcoin, Ethereum, and Ripple are vying for a spot in the cashless world, constantly reinventing themselves in the hope of offering more stable value, and quicker, cheaper settlement”, she said.
According to the IMF official, banks and other financial firms, including startups, could manage the digital currency.
“Much like banks, which currently distribute cash. Or individuals could hold regular deposits with financial firms, but transactions would ultimately get settled in digital currency between firms. Similar to what happens today, but in a split second. All nearly for free. And anytime,” noted.
Lagarde added that digital currencies should be investigated
further, seriously, carefully and creatively:
“More fundamentally, the case is about change — being open to change, embracing change, shaping change. Technology will change, and so must we,” she concluded.
You can check out IMF’s newly published paper on the pros and cons of central bank digital currencies.