IMF’s Christine Lagarde urges banks to quickly create their own cryptocurrencies

15 Novembre, 2018, 12:06 | Auteur: Auguste Feret
  • Christine Lagarde IMF

Christine Lagarde, head of the International Monetary Fund (IMF), suggested a new course of action for central banks around the world: turn their fiat currencies digital.

However, Lagarde's calls for digital currencies sponsored by central banks are likely to be met with indignation by many cryptocurrency hardliners, who advocate the foundational principles of bitcoin. Beyond regulation, should the state remain an active player in the market for money?

But millennials are reinventing how economies work.

"The key is to harness the benefits while managing the risks", Ms Lagarde said.

Ms Lagarde said if the majority of people in a country adopt digital forms of money, "the infrastructure for cash would deteriorate, leaving those in the periphery behind".

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Calling on governments to take the lead, Ms Lagarde said central banks can allay concerns people may have about the rise of cryptocurrencies by issuing their own digital currency.

The more commonly traded cryptocurrencies include bitcoin, ethereum and dogecoin. Private firms may under-invest in security to the extent they do not measure the full cost to society of a payment failure. Trust in digital currencies would be eroded in the event of a private system breakdown. "And central banks would retain a sure footing in payments", Lagarde said at a fintech conference in Singapore. However, she urged central banks to support digital currencies as a premise of the future, stating such currencies "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".

She added that while the case for digital currency "is not universal" it should be investigated "seriously, carefully and creatively". The involvement of a central bank could be viewed as intrusive, as it could mean that governments would impose unnecessary controls that might hinder transaction speeds, while sacrificing freedom and lower costs. Some legacy financial institutions and businesses have, nevertheless, been attracted to the use of blockchain technology, which underpins cryptocurrency settlements, to process transactions.

What do you think about Lagarde's proposition?

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