Central banks should think about the issue of digital currencies as we are in a time when money is changing, believes Christine Lagard, head of the International Monetary Fund (IMF).
Lagarda on Wednesday (November 14) spoke with a speech at the Singapore Fintech Festival. She highlighted the volatile nature of money and pointed out that the demand for money around the world is now declining. Central banks, he said, have the role of delivering money to the digital economy.
"I think they should consider issuing a digital currency," Lagarde said. The digital currency issued by the central bank can help increase financial inclusion and secure payments as a cheap and effective alternative to paper money.
Lagarda, however, also warned of the risks associated with crypto. "I just want to say that even if the arguments for crypto-monad are not universal, we should look at them seriously, carefully and creatively."
Change traditional task
Centralized banks around the world are exploring how increasing cash payments will affect their traditional role of pushing money and managing the money supply. Lagarda warned that the central banks of China, Canada, Sweden and Uruguay have captured this change and are trying to think about how to offer digital coins to the public.
For example, the Swedish central bank (Riksbank) plans to launch a pilot version of the e-kron digital currency in 2019. Sweden is one of the countries where money is minimally used. According to the latest survey, Riksbank uses only 13% of Swedes to buy from the store.
Deposits at commercial banks are already digital, but the crypt can also be covered by the government, as currently cash, Lagarde said. Digital currencies can come in the form of state currencies or through an account held directly at a central bank.
Hidden as bitcoin and others, on the contrary, offer a decentralized alternative, meaning that they are not controlled by any central authority. Lagarde said crypts anchored in reliance on technology did not convince her completely. "Adequate regulation remains a pillar of confidence," the IMF chief believes.