WASHINGTON: Digital currencies have a potential to make financial services “much more inclusive,” an International Monetary Fund (IMF) official has said, while warning that there are also risks worth watching.
“There is a lot of promise in these electronic currencies,” Helge Berger, the IMF’s China mission chief and assistant director in the Asia and Pacific Department, told Xinhua recently. “They lower the transaction costs involved in holding cash and moving cash. They can make it more secure.”
“And we have seen some of the advantages of digital currencies during the recession last year, when the fiscal authorities in China used electronic means to target fiscal support to particular consumers in a helpful way,” he said.
The IMF official, however, warned of risks related to digital currencies.
“When you go from printed currency to electronic currency, you have to have an operational framework around it that involves networks and computers and security protocols,” he said. “We have to learn how to do this safely.”
There is international risk as well, which needs to be kept in mind, said the IMF official.
“If electronic currencies make it easier to use one country’s currency in another country, there are complications that have to do with currency substitution, which could impact the ability of national central banks to control domestic money supply, domestic credit and inflation,” he said.
Berger said it looks like many central banks are experimenting or at least conceptually thinking about rolling out digital versions of their currencies, noting that China is among the first large economies that has been pushing forward with its experiment.
“It’s an exciting area,” he said. “We’re keeping a close eye on it and together with the Chinese authorities, we’re learning from the Chinese experience.”