Christine Lagarde, Managing Director of the International Monetary Fund (IMF), recently called on central banks to consider issuing their own digital currency.
These are statements that may seem surprising.
In a speech at the Singapore Fintech Festival, Christine Lagarde said that states should “consider the possibility of issuing their digital currency.” In comments reported by the BBC, the head of the IMF has discussed the various assets that these currencies can provide, which would be issued by central banks.
“I think we should consider the possibility of issuing digital currencies,” she said. […] The advantage is clear. Your payment would be immediate, secure, inexpensive, and potentially semi-anonymous […] And central banks could thus retain their influence in payments, “she said.
Lagarde cited examples from Sweden, Canada and Uruguay, whose central banks are “seriously considering” issuing their own digital currency.
A question of security
For Christine Lagarde, these currencies placed under the responsibility of the States could be more secure than existing cryptocurrencies. The leader has suggested that the digital assets that are traded in today’s markets may not be enough:
“Private companies may be tempted to underinvest in security, as they do not necessarily perceive the social costs of failed payments,” she warned, citing current crypto-currencies.
These statements, which are likely to boost many crypto-enthusiasts, come as the institution she leads has recently voted against the launch of a national digital currency. It was the Sovereign (SOV) that the Marshall Islands wants to issue. Indeed, the IMF believes that this initiative could lead to macroeconomic risks for the State.
In October 2017, the IMF head told CNBC that, since cryptocurrencies reduce the cost of financial transactions, they should upset the traditional financial system.
“The way new technologies can reduce the cost of financial transactions, making them more accessible […] I think they are already massively disruptive,” she said.
Despite the generally negative perception of crypto-currencies, particularly because of their pseudo-nomic (or anonymous) nature, Lagarde seems to recognize the strengths of these currencies – currencies that she wishes to closely manage. In an article published last April, she called on her readers to “keep an open mind” vis-à-vis the “crypto-active”.
“In the same way that some digital technologies have transformed our lives, surviving crypto-assets could have a significant impact on how we save, invest and pay our bills. This is why policymakers must keep an open mind, and must strive to create a fair regulatory framework that minimizes risks while allowing the creative process to bear fruit. “
On Twitter, several observers have pointed out that the currencies issued by central banks were already predominantly digital, suggesting that the IMF would first and foremost want to increase state control over them.
Silly. Central Bank currency is already mostly digital. Making it entirety digital just increases gov't control over it, & incentives adoption of hard sovereign digital cash: Bitcoin. https://t.co/jG4q00euyT
— Saifedean Ammous (@saifedean) November 14, 2018
The Morgan Creek Capital founder, Anthony Pompliano, is in for a positive news that would give more legitimacy to often-controversial assets – and that could eventually lead states to take an interest in Bitcoin:
The Head of the IMF gave a speech today that legitimized cryptocurrencies.
She said state-backed digital currencies could provide financial inclusion, security & consumer protection, and privacy in payments.
The virus is spreading and now the IMF is infected! 🚀
— Pomp 🌪 (@APompliano) November 14, 2018
It is a progression of thought.
First they don’t believe in digital currencies. Then they fight them. Then they say there could be a role for them to play if state backed. Eventually they realize Bitcoin is the answer.
Patience is key here. Everyone eventually comes around 🙂
— Pomp 🌪 (@APompliano) November 14, 2018