In her opening keynote speech at the Singapore Fintech Festival yesterday, IMF managing director Christine Lagarde argued the case for a new digital currency, suggesting central banks could take an active role in a cashless world."My message is that while the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively," Lagarde said.The IMF CEO pointed to lessons from Scandinavia and in various other countries where demand for cash is decreasing, overtaken by new specialised payment providers that offer "e-money" (from AliPay and WeChat in China, to PayTM in India, to M-Pesa in Kenya). "These forms of money are designed with the digital economy in mind. They respond to what people demand, and what the economy requires," Lagarde said."Even cryptocurrencies such as Bitcoin, Ethereum, and Ripple are vying for a spot in the cashless world, constantly reinventing themselves in the hope of offering more stable value, and quicker, cheaper settlement."Bank deposits too are feeling pressure from new forms of money, which calls into question the role of the central banks in this new monetary landscape. Beyond regulation, should the state remain an active player in the market for money?"Let me be more specific: should central banks issue a new digital form of money? A state-backed token, or perhaps an account held directly at the central bank," Lagarde asked. "True, your deposits in commercial banks are already digital. But a digital currency would be a liability of the state, like cash today, not of a private firm," Lagarde said She was looking for a trade-off between privacy and financial integrity. "Central banks might design digital currency so that users' identities would be authenticated through customer due diligence procedures and transactions recorded.""But identities would not be disclosed to third parties or governments unless required by law. So when I purchase my pizza and beer, the supermarket, its bank, and marketers would not know who I am. The state might not either, at least by default."Anti-money laundering and terrorist financing controls would run in the background. If a suspicion arose it would be possible to lift the veil of anonymity and investigate.""This setup would be good for users, bad for criminals, and better for the state, relative to cash. Of course, challenges remain. My goal, at this point, is to encourage exploration."After taking the audience of new tech professionals through some of the risks arising from banks' payments systems, she asked: "What if central banks entered a partnership with other financial institutions and said: 'you interface with the customer, you store their wealth, you offer interest, advice, loans. But when it comes time to transact, we take over'.""The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous."Putting it another way: the central bank focuses on its comparative advantage - back-end settlement - and financial institutions and start-ups are free to focus on what they do best - client interface and innovation. "This is public-private partnership at its best," Lagarde said."Technology will change, and