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IMF boss wants central banks in on digital currencies

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Christine Lagarde, head of the International Monetary Fund (IMF) has said that the active involvement of central banks in digital currencies could be a way for them to have surefooting in the evolving payments landscape.

The IMF boss disclosed this at the Singapore Fintech Festival on Wednesday, 14 November 2018.  Lagarde noted during her speech that “wind of change” in payment has become inevitable and requires immediate action from financial regulators.

“I believe we should consider the possibility to issue digital currency,” Lagarde said. “There may be a role for the state to supply money to the digital economy.”

She explained that a state-backed digital currency holds many possibilities like it could mean immediate payment, safe, cheap and potentially semi-anonymous.

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In an IMF paper released on the same day, Lagarde said that digital currencies has the potential to improve businesses conditions in remote regions where cash may no longer be an option, while adding that the banks shows little interest in helping marginalized communities. A state-backed digital currency, for her, could bring a balance with traditional companies that lean toward monopolies due to economies of scale.

“This currency could satisfy public policy goals, such as (i) financial inclusion, and (ii) security and consumer protection; and to provide what the private sector cannot: (iii) privacy in payments.

Momentum towards a state-backed digital currency is starting to build with the Bank of England publishing a working paper on the effect of such a tool on balance sheets of both central banks and commercial banks. At the time the paper was published the bank said it had no plan of issuing a digital coin anytime soon.

Bank of Canada’s senior economist, Mohammed Davoodalhosseini, has also published a report that concluded a state-backed digital currency could push up consumption by 0.64 per cent in the country and 1.6 per cent in the United States.

Lagarde also revealed that Sweden and Uruguay were “seriously considering” digital currency proposals.