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Speaking before an audience at the Singapore Fintech Festival 2018, managing director and chairwoman of the International Monetary Fund Christine Lagarde made the case for digital currency.

Says Lagarde,

“A new wind is blowing, that of digitalization. In this new world, we meet anywhere, any time. The town square is back – virtually, on our smartphones. We exchange information, services, even emojis, instantly… peer to peer, person to person. We float through a world of information, where data is the ‘new gold’– despite growing concerns over privacy, and cyber-security. A world in which millennials are reinventing how our economy works, phone in hand.”

Lagarde outlines how new forms of money will make their way into everyday usage.

Integration

Through social media, readily available for online and person-to person use, including micro-payments

Will be cheap and safe, protected against criminals and prying eyes

Lagarde points out a number of signs indicating digitization.

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Key signs of an emerging digital economy

Signs in store windows read “cash not accepted”

Bank deposits feeling pressure from new forms of money

E-money from AliPay and WeChat in China, PayTM in India, M-Pesa in Kenya

According to Lagarde,

“Even cryptocurrencies such as Bitcoin, Ethereum, and Ripple are vying for a spot in the cashless world, constantly reinventing themselves in the hope of offering more stable value, and quicker, cheaper settlement.”

Advantages of digital currencies

Reaching people and businesses in remote and marginalized regions

Backup means of payment

Low-cost and efficient alternative

Privacy

Disadvantages and risks of digital currencies – plus creative solutions

Despite risks to financial integrity , programmable money by central banks could allow regulators to “lift the veil of anonymity” if suspicions arose.

programmable money by central banks could allow regulators to “lift the veil of anonymity” if suspicions arose. Despite risks to innovation by having central banks cover everything from digital wallets, to tokens, to back-end settlement services, new public-private partnerships would allow central banks to handle back-end settlement, while financial institutions and start-ups focus on client interface and innovation.

Despite risks to financial stability due to pressure on bank deposits, “the jury is still out on whether digital currencies would really upset financial stability.”

Lagarde says we should embrace change.

“My message is that while the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively. More fundamentally, the case is about change – being open to change, embracing change, shaping change. Technology will change, and so must we. Lest we remain the last leaf on a dead branch, the others having decided to fly with the wind.”

The Singapore Fintech Festival, which took place on November 12-16, attracted over 250 global representatives from central banks and regulatory agencies, financial institutions, venture capital firms and fintech companies who made a wide range of presentations covering monetary policy, and the future of blockchain, digital assets and cryptocurrencies.

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You can download the full speech here.

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