IMF Chief, Christine Lagarde, known for keeping a positive view on cryptocurrencies has once again reiterated her views about cryptocurrencies at the Singapore Fintech Festival today.
In her speech titled, “Winds of Change: The Case for New Digital Currency” she opened her speech with the words: “In Singapore, it is often windy. Winds here bring change and opportunity.”
In her speech, she made a strong case of central banks issuing their own cryptocurrencies. Lagarde referred to the diminishing role of money and state in terms of guaranteeing its money. The quest of common currency began since people started to travel in large scale for commerce some thousand years ago when the state became the guarantor of money.
But digital money undermines this structure, making the entire financial system obsolete. She said: “Data is the new gold and physical cash is on the way out.”
She also specifically stated that she is not entirely convinced that in cryptocurrencies, state regulations can be done away with it. There will be some amount of liability of the state. Expanding her thought in the matter, she said:
“Various central banks around the world are seriously considering these ideas, including Canada, China, Sweden, and Uruguay. They are embracing change and new thinking—as indeed is the IMF.”
IMF will be releasing a paper covering the domestic implications of a national cryptocurrency and she has identified three benefits: financial inclusion, customer protection, and customer privacy.
On the issue of financial inclusion, she said: “We know that banks are not exactly rushing to serve poor and rural populations.”
On customer protection, she said:
“physical money was a check on the power of financial institutions. Without it, private payment providing companies would dominate. Such a system would tend towards monopoly, and make the economy too reliant on one pillar. Digital currency could prevent these issues by providing an alternative and back-up.”
On privacy issue:
There is a need for a new anonymous payments structure as more and more payments are directed through digital channels.
“Imagine that people purchasing beer and frozen pizza have higher mortgage defaults than citizens purchasing organic broccoli and spring water. What can you do if you have a craving for beer and pizza but do not want your credit score to drop? Today, you pull out cash. And tomorrow?”
Concluding her speech she said:
“she does not necessarily think that cryptocurrency will harm financial stability – “the jury is still out”. For example, digital currency could also prevent bank runs.