Christine Lagarde, IMF’s Managing Director, said digital currencies, like bitcoin or ethereum, “might just give existing currencies and monetary policy a run for their money” in remarks made at the 20th anniversary of the independence of Bank of England.
Digital currencies “may one day be easier and safer than obtaining paper bills, especially in remote regions,” she said and they “could actually become more stable,” than fiat currencies. Lagarde says:
“For instance, they could be issued one-for-one for dollars, or a stable basket of currencies. Issuance could be fully transparent, governed by a credible, pre-defined rule, an algorithm that can be monitored… or even a “smart rule” that might reflect changing macroeconomic circumstances.”
Citizens might prefer digital currencies, she said, because “they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities.”
The former Finance Minister of France further said that if private or computer issued digital currencies were too unstable, “citizens may even call on central banks to provide digital forms of legal tender.”
She further said digital currencies like bitcoin or ethereum could be added to the IMF run fund called special drawing right (SDR) which handles a basket of currencies.
That was made more attractive by the addition of China’s yuan last year, she said, and might get a further boost by the addition of digital currencies to the point where SDR could supplement the euro or the dollar.
That’s not far fetched, she said, “if the two were to come together – the digital acceleration and facilitation, and the geopolitical situation – that would be propitious for relying on an alternative,” the IMF director said.
Her statements regarding SDR were seemingly made off-script, with her prepared remarks stating only that IMF was “considering a role for a digital version of the SDR.”