IMF managing director Christine Lagarde has stated the case for central bank backed digital (CBDC) currencies, arguing for a greater role for the state in managing the retreat from cash in developed economies.
In a speech given at the Singapore Fintech Festival, the IMF chief argues that a CBDC could satisfy public policy goals, such as financial inclusion, security and consumer protection and enable privacy in payments.
Rather than focusing on the downsides of financial integrity and stability, Lagarde urges policy makers to show more creativity in their thinking.
She suggest central banks might design digital currency so that users’ identities would be authenticated but not disclosed to third parties, ensuring anonymity. In this vision, anti-money laundering and terrorist financing controls would run in the background.
"If a suspicion arose it would be possible to lift the veil of anonymity and investigate," she states. "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."
As to the risks posed to the continuing role of commercial banks, Lagarde argues for a partnership approach between central banks and the private sector in such a way that "the central bank focuses on its comparative advantage — back-end settlement — and financial institutions and start-ups are free to focus on what they do best — client interface and innovation. This is public-private partnership at its best."