On "The Case for New Digital Currency"

Photo by  Ramón Salinero

Last week, comments from “Winds of Change: The Case for New Digital Currency” by Christine Lagarde, International Monetary Fund (IMF) Managing Director, included: 

  • 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.

  • money itself is changing. We expect it to become more convenient and user-friendly, perhaps even less serious-looking.

  • “We expect it to be integrated with social media, readily available for online and person-to-person use, including micro-payments. And of course, we expect it to be cheap and safe, protected against criminals and prying eyes."

Also, comments from the IMF’s report “Casting Light on Central Bank Digital Currency” (Nov. 12, 2018) included:  

  • Digitalization is reshaping economic activity, shrinking the role of cash, and spurring new digital forms of money. Central banks have been pondering whether and how to adapt. One possibility is central bank digital currency (CBDC)—a widely accessible digital form of fiat money that could be legal tender. While several central banks have studied the adoption of CBDC and have undertaken pilots, many have not actively explored it and remain skeptical.

  • “In advanced economies, there may be scope for the adoption of CBDC as a potential replacement for cash for small-value, pseudo-anonymous transactions. But in countries with limited banking sector penetration and inefficient settlement technology, demand for CBDC may well be greater.”


  • The use of digital money and digital assets will continue to expand and services will likely evolve beyond platforms such as Bitcoin and Ethereum.

  • The IMF's report, which cites potential uses of digital money in countries with limited banking sector penetration and inefficient settlement technology, should also include countries with unstable currencies (which are generally outside of the G-8).

  • Regarding blockchains, while early market participants expected "open", "decentralized" and "trust-less"systems, there is increasing interest for uses that 1) are more centralized, 2) address specific "private" needs, 3) comply with regulatory requirements and 4) are managed within traditional IT processes.

Paul Dravis