Christine Lagarde, Managing Director and Chairwoman of the International Monetary Fund (IMF), stated she believes the “exploration” of central bank digital currencies (CBDCs) should be contemplated as demand for digital money continues.
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“I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy,” said Lagarde, in a prepared speech during the Singapore Fintech Festival on Wednesday.
According to Lagarde, central banks in China, Sweden, Uruguay, and Canada are “seriously” considering issuing digital currency.
“They are embracing change and new thinking – as indeed is the IMF,” said Lagarde.
Cryptocurrencies like bitcoin (BTC), Ethereum (ETH), and XRP are “vying for a spot in the cashless world, constantly reinventing themselves in the hope of offering more stable value, and quicker, cheaper settlement.”
In a new report published by the IMF, titled “Casting Light on Central Bank Digital Currency,” the IMF stated, “cryptocurrencies are different along many dimensions and struggle to fully satisfy the functions of money, in part because of erratic valuations.”
When assessing forms of money like cash, CBDCs, commercial bank deposits, and cryptocurrencies, the IMF established “cryptocurrencies are the least attractive option.”
The score was due in part to “current technological limitations,” in regard to settlement speed.
In the end, the IMF believes research on digital currency needs deeper evaluation due to “deep and difficult and have far-reaching implications.”
Lagarde stated digital currency motions “great promise” for the unbanked as well as privacy, however, the implementation of such technologies could risk financial integrity and stability.
“This setup would be good for users, bad for criminals, and better for the state, relative to cash. Of course, challenges remain. My goal, at this point, is to encourage exploration,” said Lagarde.