IMF Chief Backs the Idea of Central Bank Digital Currencies

Christine Lagarde, the managing director of the International Monetary Fund (IMF) recently spoke at a fintech conference in Singapore wherein she encouraged that central banks should consider about the idea of having their own cryptocurrencies.

Lagarde said that the central banks should take the charge of establishing secured networks with digital cash in order to prevent other networks from becoming safe havens for money launderers and fraudsters. She clearly highlighted that the dynamics of global finance is changing quickly and central banks should adapt to it. 

In her speech, Lagarde said: "I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.” She further added: “Various central banks around the world are seriously considering these ideas. While the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively.”

Issuing CBDCs mean that the entire system will be regulated by the respective central banks of those countries. Furthermore, Lagarde believes that it will also help towards quick expansion of digital financial services into developing countries.

“The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous. And central banks would retain a sure footing in payments. In addition, they would offer a more level playing field for competition, and a platform for innovation. Meanwhile your bank or fellow entrepreneurs would have ensured a friendly user experience based on the latest technologies,” Lagarde said.

She further continued: “Putting it another way. The central bank focuses on its comparative advantage – back-end settlement – and financial institutions and start-ups are free to focus on what they do best – client interface and innovation. This is public-private partnership at its best.”

Different economies across the globe like Sweden, Canada, and Uruguay are already considering the option for having a central bank digital currency (CBDC). More and more economies across the globe are moving towards a cashless society. However, Lagarde said that consumers are becoming more and more vary os using their bank accounts to purchase goods and services. this is because they can be easily tracked by third-party insurers who can later increase the charges based on the transaction data.

She said that its legitimate to have digital cash but a strict monitoring should be followed. Lagarde also stressed the user of blockchain technology powering the FinTech revolution. She said that blockchain can help to deploy safe and secure systems.

Lagarde added: “A new wind is blowing, that of digitalization. In this new world we meet anywhere, anytime. The town square is back – virtually, on our smartphones. We exchange information, services, even emojis, instantly … peer to peer, person to person.”