Central banks should consider issuing digital currencies: IMF chief
Christine Lagarde, head of the International Monetary Fund (IMF), recently gave her views on digital currencies issued by various central banks to prevent the incidents of fraud and money laundering. Lagarde made her statements at the Singapore Fintech Festival, which was held on Monday.
"Your deposits in commercial banks are already digital. But a digital currency would be a liability of the state, like cash today, not of a private firm. This is not science fiction. Various central banks around the world are seriously considering these ideas, including Canada, China, Sweden, and Uruguay. They are embracing change and new thinking—as indeed is the IMF," she stated.
She noted that digital currencies have the potential of achieving public policy goals such as financial inclusion, security, consumer protection and privacy in payments.
According to Lagarde, central banks must quickly swing into action to establish digital cash for private financial transactions. "For a start, private firms may under-invest in security to the extent they do not measure the full cost to society of a payment failure. Resilience may also suffer—with only a few links in the payment chain, the system may stop working if one of these links breaks. Think about a cyber-attack, a glitch, bankruptcy, or a firm's withdrawal from the local market," she explained.
She then pointed out that many consumers still think twice before using their bank accounts to buy goods or services as the fear of being tracked by third parties still looms large. This results in higher transaction charges.
The IMF chief sounded hopeful of the future of digital currencies as she said it was legitimate to prefer digital cash. She stressed on the fact that central banks should act as a protector to shield customers from money laundering activities and cyber criminals. The IMF believes only the central bank-developed systems would be safe enough to meet the user's needs.
"A new wind is blowing, that of digitalisation. 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," she said.