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The IMF managing director, Christine Lagarde, spoke about the cryptocurrencies and blockchain technology during her speech at the Singapore Fintech Festival.
The CEO highlighted three topics during his speech, including issues concerning the change in the nature of money and the Fintech revolution, the role of central banks in the new financial landscape, particularly in the digital currency, and the disadvantages associated with it and the solutions that can effectively minimize them.
Christine Lagarde started talking about the changing nature of money and fintech. He said that at a certain moment the transactions were settled with the exchange of coins and all that mattered was whether the currency was valid. Nevertheless, as trade grew, carrying coins became a nuisance and as a solution Chinese paper money was introduced in the ninth century, he said. However, this was not enough; with the increase of innovation, the bills were in place.
He went on to say:
"Suddenly, it mattered with whom you had to deal with […] Confidence has become essential and the state has become the guarantor of this trust, offering liquidity and supervision interruptions. Why is this short tour of history relevant? Because the fintech revolution calls into question the two forms of money that we have just discussed – coins and commercial bank deposits, and questions the role of the state in providing money "
The CEO stated that now, millennials, reinvent how the economy works with their phones and that the data is the new gold. With this changing time, it is expected that money is cheaper, easier to use and integrated with social media. It should be ready for micro-payments, online payments, while being cheap and secure, he said.
Lagarde went on to say that cash demand is falling, citing the example of PayTM, a payment processing app used in India and M-Pesa, another payment processor that is commonly used in Kenya, claiming that they have responded to people's demands and to the needs of the economy.
Lagarde said:
"Even cryptocurrencies like Bitcoin, Ethereum and Ripple are competing for a place in the world without cash, constantly reinvesting in the hope of offering a more stable value and a quicker and cheaper deal."
In addition, the CEO stated that all central banks should issue their own digital currency, a state cryptocurrency available for retail payments. She said:
"It is true, your deposits in commercial banks are already digital, but a digital currency would be a responsibility of the state, like money today, not a private company.This is not science fiction.Many central banks around the world are taking seriously consider these ideas, including Canada, China, Sweden and Uruguay.They are embracing change and the new way of thinking – as indeed is the IMF ".
Lagarde also stated:
"I think we should consider the possibility of issuing digital money.There might be a role for the state to provide money for the digital economy.This currency could meet public policy objectives such as (i) financial inclusion and (ii) ) consumer safety and protection, and provide what the private sector can not: (iii) privacy in payments ".
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