Central Banks Should ‘Consider’ Issuing Digital Currency – Christine Lagarde, the Managing Director and Chairperson of the International Monetary Fund (IMF) has said that central banks around the world need to consider issuing digital currencies. Lagarde added, there is a role for central banks to enter the world of digital currencies. Therefore, it is necessary for states to ‘consider the possibility to issue digital currency’.
Speaking at the Singapore Fintech Festival held at the Singapore Expo on Wednesday (Nov 14, 2018), Ms Lagarde outlined the various benefits that would emerge from such a move:
“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”.
Ms Lagarde pointed out the initiatives taken by reserve banks in countries such as Sweden and Canada. Where central bank digital currencies (CBDCs) were under serious consideration. Lagarde added that such a move would not only make transactions safer but also more common and consequently cheaper.
Central Banks Should ‘Consider’ Issuing Digital Currency – Lagarde put emphasis on the fact that unlike private currencies such as bitcoin and ethereum, money created by central banks would be regulated and trustworthy, and could reach all sectors of society. The CBDCs issued by central banks would be the state’s liability as opposed to private cryptocurrencies, which would make such digital currencies more secure. This is because governments will have no choice but to go to the fullest extent possible to ensure their security.
Lagarde’s call is interesting given that the IMF had recently expressed its concerns over a plan. Which is to issue a state-backed cryptocurrency. The IMF argued that the planned national cryptocurrency to be known simply as the Sovereign (SOV). It would raise the macroeconomic risks of the Pacific island.
Ms Lagarde was initially wary of cryptocurrencies and the negative perception cryptocurrencies have earned in some areas due to their anonymous nature. While acknowledging that there was a need for a degree of regulation in the sector. The IMF head has been careful to warn that this need not go overboard. In a blog post about seven months ago, Lagarde called for cryptocurrency regulations that would minimize risk while encouraging innovation.