International Monetary Fund head Christine Lagarde said central banks around the world should consider issuing digital currency.
Speaking in Singapore, Ms Lagarde said this could make digital currency transactions safer.
Non-cash payments have increased over the years, raising challenges for governments and central banks.
Regulators have voiced concerns with digital currencies and called for greater oversight.
“I believe we should consider the possibility to issue digital currency,” Ms Lagarde said in a speech at a conference in Singapore. “There may be a role for the state to supply money to the digital economy.”
“The advantage is clear. Your payment would be immediate, safe, cheap and potentially semi-anonymous… And central banks would retain a sure footing in payments.”
Ms Lagarde said central banks in Canada, China, Sweden and Uruguay were all “seriously considering” digital currency proposals.
A virtual currency issued by a central bank would be a liability of the state – as cash is – not of a private firm.
This would help consumers by making transactions safer and more common, and as a result cheaper.
“The more people you serve, the cheaper and more useful the service,” Ms Lagarde said. “Private firms may under-invest in security to the extent they do not measure the full cost to society of a payment failure.”
She added that while the case for digital currency “is not universal” it should be investigated “seriously, carefully and creatively”.
Although the technology underlying digital assets has been praised for speeding up financial transactions and reducing costs, the anonymity behind cryptocurrency trading has prompted concern among regulators.
Ms Lagarde previously said the anonymity of currencies such as Bitcoin means they are used by criminals and terrorists.
Bank of England Governor Mark Carney has also said cryptocurrencies such as Bitcoin should be regulated to crack down on illegal activities and protect the financial system.