IMF’s Lagarde calls for central bank digital currencies
In a speech given at the Singapore Fintech Festival this week, the head of the International Monetary Fund (IMF) has said the international community should “consider” endorsing central bank issued digital currencies (CBDCs).
The comments come in the same month that news emerged that Sweden’s central bank had begun investigating the process of introducing its own state-issued cyber-currency.
Now, IMF managing director Christine Lagarde said that despite being “not entirely convinced” on the concept of cryptocurrencies more generally, there may be a case for states to issue government-backed tokens or similar assets in order to prevent them becoming a haven for fraudsters and money-launderers.
“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 told the event.
The comments also come a day after the IMF published a dedicated report on CBDCs, examining what it views as the pros and cons of the financial tool.
As Lagarde noted, various jurisdictions are currently considering or starting out on the journey to implement state-sponsored tokens.
She said: “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. “Putting it another way: the central bank focuses on its comparative advantage – back-end settlement – and financial institutions and startups are free to focus on what they do best: client interface and innovation. This is public-private partnership at its best.”
If done properly, CBDCs could “could satisfy public policy goals,” she said, specifically “financial inclusion,” “security and consumer protection,” and “privacy in payments.”
However, Lagarde also stressed she retained reservations about the “downsides” of CBDCs, but that she “would also like to highlight risks of stifling innovation — the last thing you want. My main point will be that we should face these risks creatively.”