IMF Makes G-20 Push to Police `Dark Side' of Crypto-Currencies
(Bloomberg) -- The International Monetary Fund can play a central role in coordinating the global regulation of crypto-currencies so they aren’t used for illegal purposes, said Managing Director Christine Lagarde.
Lagarde, in a blog post on Tuesday, cautioned about the “dark side” of digital cash and its potential to finance terrorism or facilitate money laundering. More needs to be done to address the threat and the fund will play its part, she said. Central bankers and finance chiefs from the Group of 20 will discuss the regulation of crypto-currencies when they gather next week in Buenos Aires.
“No country can handle this challenge alone,” she wrote. “We are uniquely situated to be a forum for helping develop answers in the evolving crypto-asset space.”
The IMF’s offer comes amid a growing chorus to improve oversight of the technology, which surged in popularity last year when the digital currency Bitcoin hit an all-time high. Bank of England Governor Mark Carney has expressed concern about the volatility of crypto-currencies, and U.S. Treasury Secretary Steven Mnuchin has pledged to work with the G-20 to prevent them from becoming the digital equivalent of anonymous bank accounts.
“Of course, money laundering and terrorist financing is only one dimension of the threat,” Lagarde wrote. “Financial stability is another. The rapid growth of crypto-assets, the extreme volatility in their traded prices, and their ill-defined connections to the traditional financial world could easily create new vulnerabilities.”
She provided some recommended strategies to start addressing the dangers posed by crypto-currencies, including the following:
- Focusing on policies to protect consumers, such as using so-called distributed ledger technologies that allow those with a shared interest in maintaining safe transactions to be able to communicate more easily
- Employing biometrics, artificial intelligence and cryptography to quickly identify suspicious transactions
- Ensuring the same rules apply in different countries to protect consumers
Lagarde said that countries will have to work together on a regulatory framework, considering most digital currencies aren’t bound to a single country or central bank. “It would not be wise to dismiss crypto-assets,” she wrote. “We must welcome their potential but also recognize their risks.”
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