Head Of IMFs Tells World Banks To Consider Issuing Digital Currencies
International Monetary Fund (IMF)’s Christine Lagarde recently asked the world’s central banks to consider issuing digital currencies.
Largade, currently the Managing Director and Chairperson of the IMF, quipped that countries could and do play a significant role when it comes to injecting money to fund global economies.
According to her, it is, therefore, crucial that these countries consider the feasibility of releasing a national digital currency.
In a speech given in Singapore and first published by the BBC earlier, the IMF chief touched on a number of benefits that countries can reap from such a venture, saying:
“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 her view, Sweden and Canada were two great examples of nations whose reserve banks have outlined robust mechanisms to develop central bank digital currencies (CBDCs).
She added that having such an asset in place would undoubtedly make transactions not only safer but also fairly widespread and thus cheaper.
CBDCs offer more security
Lagarde argued that since a state’s central bank issues CBDCs, they fall under the purview of the nation in question and thus giving the state legal responsibility for their use.
In other words, she opined that CBDCs would be more secure for its users than it currently is with the existing cryptocurrencies. Her views fall in line with the belief that a government is likely to spare no effort in ensuring that it attains the highest possible levels of security.
The IMF head said that with existing digital currencies, private promoters may not have the best interests and thus “under-invest in security.”
Largade added that non-current cryptocurrencies might not put into account the “full cost” of a payment failure may have on the society, unlike a state.
What has changed at the IMF?
It is worth mentioning that Lagarde’s views about central bank issued cryptocurrencies are quite eye-catching, bearing in mind the IMF recently appeared to harbor misgivings regarding such assets.
In September, the financial institution argued against plans of by the Republic of Marshall Islands that aimed to establish a national cryptocurrency.
Marshall Islands planned to issue a state-backed cryptocurrency dubbed Sovereign (SOV), which the IMF said could lead to monetary instability alongside other risks like exposure to significant volatility.
It referred to plans to distribute SOVs to the Island nation’s citizens as similar to employing “helicopter money” to achieve monetary expansion. Lagarde’s position is therefore expressive of an about turn.
Although she had a skeptical view of cryptocurrencies at the beginning, Lagarde appears to have gradually warmed up to crypto and its underlying technological advantages.
Her current ‘warmth’ is far removed from those early days when she pointed out that cryptocurrency’s low transaction costs would hurt legacy financial systems, referring to crypto as ‘disruptive.’
It is notable that the IMF chief displays such remarkable belief in crypto, albeit via CBDCs. However, when taken on a broader perspective, Largade appears to maintain a balanced view of cryptocurrencies.
She has previously noted that the crypto industry needs to have proper regulatory oversight but cautioned that this need not be blown out of proportion.
As Largade asks nations to ponder issuing digital currencies, one country that may need to have a national cryptocurrency in place sooner is sanction-hit Iran, whose Central Bank was officially removed from SWIFT.
This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.