Our Digital Future
IMF Blog, May 30, 2018
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Bibliographic details
- Authors: offering alternatives to traditional means of payment. Will digitalization redefine money? In this issue, we explore the possible consequences, good, bad.
- Published: May 30, 2018
Context and framing
- Publication date: May 30, 2018
- Theme: Fintech and the potential redefinition of money through digitalization.
- Core question: Will digitalization redefine money?
Historical and conceptual observations
- Money historically "has for centuries been central to human relationships."
- Loss of faith in money's value "can result in economic and political instability, even war."
- Traditional view: Money is "an expression of sovereignty," attributed to Harold James of Princeton University.
- Cryptocurrencies: "Most experts agree that so-called cryptocurrencies do not possess all the core attributes of money."
- Distributed ledger technology: Recognized as having "the potential to transform payment services by removing the need for an intermediary."
Implications for central banks and state authority
- Political motivation: Bitcoin described as having a political motivation to decentralize and reduce intermediary/state roles.
- Potential consequence: Removing intermediaries "would reduce the role of central banks and weaken state authority over the money supply."
- Cash usage example: Swedish central bank governor Stefan Ingves notes that "only 13 percent of transactions in his country are settled with cash."
- Policy response option: Central banks might "redefine their role" by issuing their own digital tokens, a solution that "would require careful consideration of choices and policy trade-offs," according to the IMF’s Dong He.
Risks and benefits
- Worries about misuse: The piece highlights concerns about the misuse of financial technology.
- Potential benefits: Financial technology is also recognized for its "potential to improve our lives."
- Policy stance from IMF leadership: IMF Managing Director Christine Lagarde advises: "Above all, we must keep an open mind about crypto assets and financial technology more broadly, not only because of the risks they pose, but also because of their potential to improve our lives."
Source: Our Digital Future — May 30, 2018
