Christine Lagarde, Managing Director of the International Monetary Fund (IMF) has warned over the perils of cryptocurrencies, in an IMF blog published today. Addressing crypto's dark side as a potential conduit for money laundering, Lagarde called for regulators to “fight fire with fire”; she said global authorities could harness the potential cryptocurrencies hold to help bring them under control.
Lagarde said the use of distributed ledger technology can speed up information sharing between market participants and regulators. “Those who have a shared interest in maintaining safe online transactions need to be able to communicate seamlessly,” she said in the post. “The technology that enables instant global transactions could be used to create registries of standard, verified, customer information along with digital signatures. Better use of data by governments can also help free up resources for priority needs and reduce tax evasion, including evasion related to cross-border transactions.”
Largarde also focused on other potential benefits, including those offered to central banks, some of whom, she conceded, are considering issuing digital currencies. She counselled taking a step back to understand the peril that comes along with the promise. She also spelled out a raft of research already undertaken to measure the threat posed by crypto assets and to widen the regulatory net.
For Lagarde, the biggest concern is the anonymity that makes crypto assets so attractive to many. But this decentralized nature makes them dangerous, she said, as potential major, new vehicles for money laundering and the financing of terrorism.
Lagarde also suggested that biometrics, artificial intelligence, and cryptograph could also be used to reign in unscrupulous crypto currency operators. These technologies can enhance digital security and identify suspicious transactions in close to real time, giving law enforcement a leg up in providing a speedy response to stop illegal transactions, she stated.
In order to successfully counter the crypto threat, she advocated greater international cooperation, providing an example in the successful closure of AlphaBay, which involved the Europol and law enforcement agencies in the United States, Thailand, the Netherlands, Lithuania, Canada, the United Kingdom, and France.
Looking forward, she announced that the G-20 has agreed to put crypto-assets on the agenda of its November 2018 summit in Argentina.