Daily Management Review

Issuing Digital Currency Needs to Be Considered By Central Banks: IMF Chief


11/15/2018




Issuing Digital Currency Needs to Be Considered By Central Banks: IMF Chief
The possibilities of issuing digital currency should be looked into by central banks, believes the chief of the International Monetary Fund Christine Lagarde arguing that this would increasing the safety of digital currency transactions
 
“That currency could satisfy public policy goals, such as financial inclusion, and security and consumer protection; and to provide what the private sector cannot: privacy in payments,” Lagarde asserted in a speech delivered at the Singapore Fintech Festival.
 
In any case central banks are facing a challenge of managing transactions because of the rise of non-cash transactions throughout the world. Concerns over digital currencies have been raised by regulators and have demanded greater oversight and control.
 
"I believe we should consider the possibility to issue digital currency," Lagarde said "There may be a role for the state to supply money to the digital economy. 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."
 
Expanding the explaining the advantages for central banks to do so, she said there can be an enhancement in financial stability by central bank digital currencies because such a step would bring down the risk of bank runs. She said that when people start to believe that bank withdrawals are honoured on a first-come-first-serve basis with respect of cash, people make runs on banks.
 
“Digital currency, instead, because it can be distributed much more easily than cash, could reassure even the person left lying on the couch!” Lagarde argued.
 
There is an expectation among people to money being integrated with the social media in the current fintech revolution, said the IMF chief because they believe that money can be made readily available online and through person-to-person usage  - including for micro-payments and they would be cheap and safe. Further such transactions would also be protected against criminals and prying eyes.
 
The possible threats and risks to financial integrity and financial stability can be mitigated by the wide canvas of technology, she said while refuting opposition to the issuing of digital currencies by central banks.
 
The most appropriate method to encourage innovation of digital currency issued by central banks is the use of public-private partnership, she said.
 
“The central bank focuses on its comparative advantage back-end settlement—and financial institutions and start-ups are free to focus on what they do best—client interface and innovation. This is public-private partnership at its best,” said Lagarde.
 
Lagarde further argued that it was also possible to usher in and enhance financial inclusion in remote and marginalized areas and societies of the world through the central bank digital currency. “We know that banks are not exactly rushing to serve poor and rural populations,” she said pointedly.
 
Serious consideration about proposal of about digital currencies is already being given by central banks in Canada, China, Sweden and Uruguaym Lagarde said.
 
(Source:www.forbes.com)






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