Christine Lagarde, IMF Managing Director and Chairwoman, encourages the “exploration” of digital currencies
“Change is the only constant.”
The Greek philosopher, Heraclitus of Ephesus made this observation years ago and today it captures the essence of Lagarde’s speech delivered on Wednesday this week at the Singapore Fintech Festival. It is a pivotal declaration on the part of a major international financial institution — the International Monetary Fund — in favour of harnessing the power and potential of distributed ledger technology.
Lagarde discussed three important emerging aspects of fintech: firstly, the fact that money is becoming increasingly digital worldwide. Money as we know it is rapidly evolving and adapting to the advancements in technology taking place as we speak. There is a fintech revolution underway. As with all technology, it takes a while to become mainstream — but once fully embedded, it quickly snowballs and evolves at an incredible pace. Phenomenons such as M-Pesa mobile money in Kenya, AliPay and WeChat in China, to PayTM in India are here to stay. They were created in response to the specific financial climate in those countries and have enabled their economies to bank a wider, more versatile segment of the population. Similarly, the digital currencies emerging are seeing more take up because they fulfil a need.
Secondly, Lagarde highlighted the benefits of digital currencies as well as the merits of central banks setting up national digital currencies. The fintech revolution “questions the role of the state in providing money”. What is at stake? Financial inclusion, security and consumer protection, and finally, privacy in payments. It is imperative that governments and public institutions keep abreast of those changes and harness them for the good of society. Without this, governments and central banks risk being left behind and also marginalising large swathes of their inhabitants. Blockchain technology, on which cryptocurrencies operate, has many possible uses which could solve multiple problems related to authentication and record-keeping. As records on the blockchain are immutable, it could help with verifying the source of rare materials, protecting medical records or even keeping track of title deeds for property management purposes (as they’ve started doing in the Republic of Georgia).
Finally, Lagarde also noted some of the potential downsides of central bank issued digital currencies such as a lack of innovation that may occur in the space if central banks monopolise the technology. However, the IMF Managing Director and Chairwoman proposes a solution for this: for central banks to handle transactions and partner with private institutions and banks who would handle customer facing operations such as safe custody and lending products. As Lagarde points out, the advantage of this would be to ensure innovation continues and it also would give customers the best banking and trading experience: transactions would take place “[…] in a split second. All nearly for free. And anytime”.
At DAG Global, we are working towards setting up the world’s first fully integrated traditional bank, offering trading and banking of both national fiat currencies and digital assets in a one-stop-shop. We are a team of experienced finance and digital finance professionals, with over a 100 years of combined expertise in the finance industry, working hand in hand with the FCA to launch our project. Our project is one of the many unique ideas flourishing with the fintech revolution underway. Just yesterday morning, DAG Global CEO, Sean Kiernan, was interviewed by the BBC World Service News (18:28) to comment on Christine Lagarde’s speech. We are going through an exciting period of technological change. The world over, blockchain technology is being applied to a range of industries to effectively tackle and solve some of the world’s most pressing issues. We believe that it is going to #digitizethefuture in an unprecedented way — watch this space!
Christine Lagarde’s full, original speech is available here.