IMF Chief Lagarde: Central Banks Should ‘Consider’ Issuing Digital Currency

The Managing Director and Chairperson of the International Monetary Fund (IMF), Christine Lagarde, has called on central banks around the world to consider issuing digital currencies.

According to Lagarde, the state has a role to play in injecting money to the digital economy and it was, therefore, necessary to ‘consider the possibility to issue digital currency’. Initially reported by the BBC, the IMF head outlined the various benefits that would emerge from such a move in a speech delivered in Singapore.

“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,” said Lagarde.

Citing the example of reserve banks in countries such as Sweden and Canada where central bank digital currencies (CBDCs) were under serious consideration, Lagarde added that such a move would not only make transactions safer but also more common and consequently cheaper.

Enhanced Security
Per Lagarde, the fact that CBDCs would be the state’s liability as opposed to the existing cryptocurrencies would make such digital currencies more secure. This is because governments will have no choice but to go to the fullest extent possible to ensure their security.

“Private firms may under-invest in security to the extent they do not measure the full cost to society of a payment failure,” Lagarde warned in reference to the existing cryptocurrencies.

Lagarde’s call is interesting given that the financial institution she heads recently expressed misgivings over a plan by the Marshall Islands to issue a national cryptocurrency. As reported by CCN, the IMF argued that the planned state-backed cryptocurrency to be known simply as the Sovereign (SOV) would raise the financial integrity and macroeconomic risks of the Pacific island.

Change of Heart
While she was initially skeptical of cryptocurrencies, Lagarde has since warmed up to the nascent technology. Earlier this year as CCN reported, the IMF head noted that cryptocurrencies were reducing the cost of making financial transactions and thus posed a threat to the traditional financial system.

“The ways in which new technologies are lowering the cost to make financial transactions more accessible, even in very small numbers…I think it’s already massively disruptive,” Lagarde said at the time.

With regards to the negative perception that cryptocurrencies have earned in some quarters due to their anonymous nature, Lagarde has also proved to be level-headed. While acknowledging that there was a need for a degree of regulation in the sector, the IMF head has been careful to warn that this need not go overboard. In a blog post about seven months ago, Lagarde called for cryptocurrency regulations that would minimize risk while encouraging innovation.


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Author: Mark Emem
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IMF Chief Warns World Trade in Danger of Being ‘Torn Apart’ Amid Tariff War

As the standoff between the US and China keeps unfolding, Christine Lagarde warned that “darker clouds are looming” over the currently bright picture and outlined the main goals for the global economy.

Managing Director of the International Monetary Fund (IMF) Christine Lagarde lashed out at protectionism, which casts a shadow over the future of global trade, stating that “restrictions hurt everyone, especially poor customers.”

  “Not only do they lead to more expensive products and more limited choices, but they also prevent trade from playing its essential role in boosting productivity and spreading new technologies,” Lagarde said during her speech at the University of Hong Kong.

According to her, “the current global picture is bright,” but there are “darker clouds looming.”

The “significantly increased” uncertainties include trade tensions, rising financial and fiscal risks, as well as more uncertain geopolitics. She warned that the world trade system of “rules and shared responsibility is now in danger of being torn apart.”

“This would be an inexcusable, collective policy failure,” emphasized Lagarde in her speech ahead of the annual spring meetings of country leaders and top bankers of the IMF’s 189 members, which is to take place in Washington next week.

US-China tensions are expected to dominate the agenda of the summit according to the Guardian.

In March, the United States imposed new tariffs on steel and aluminium imports that targeted China, among other countries. Beijing retaliated in April by introducing duties on certain US imports.

Last week, Washington announced yet another set of tariffs that would cover about $50 billion in Chinese goods, while US President Donald Trump suggested introducing tariffs that would target $100 billion in Chinese goods imports. Shortly after the statements, Beijing announced similar duties on US imports of comparable value.

Lagarde’s To-Do List for Tackling Imbalance

Although she didn’t call name names, Lagarde warned against exchanges of threats, which can only make the situation worse.

“There are threats, there are counter-threats, there is an attempt to open a dialogue — we should support that dialogue attempt as much as we can. The impact of those threats is minimal on both sides. What is not minimal is the way in which confidence can be undermined,” she emphasized.

Lagarde also gave her view on the best ways to deal with the imbalance, saying “Unfair trade practices have little impact on a country’s overall trade deficit with the rest of the world. That imbalance is driven by the fact that a country spends above its income.”

According to her, more effective instruments include reducing government deficits, strengthening fiscal frameworks and gradually decreasing public debt.

So she advised the US to narrow its fiscal deficit and suggested that Germany could contribute by spending more. As for large emerging markets such as China and India, she pointed out that “Strengthening financial stability by increasing buffers in the corporate and banking sectors is key.”

The IMF earlier expressed strong concerns over Donald Trump’s tariff restrictions.
“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminium and steel,” the statement of the organization read.

Meanwhile, earlier Christine Lagarde expressed doubt regarding whether US President-elect Donald Trump has a clear plan of the economic policies he is going to pursue.


 

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Author Sputnik News

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