Monday , 19 February 2018

IMF: Cryptocurrency regulation is ‘Inevitable’

Christine Lagarde, head of the International Monetary Fund, has stated that international regulatory action on cryptocurrencies is “inevitable.”

Speaking in an interview with CNN Money at the World Government Summit in Dubai on Sunday, Christine Lagarde, managing director of the IMF, said that illicit cryptocurrency use had made the IMF and other regulatory agencies determined to develop a framework for cryptocurrency regulation.

“There is probably quite a bit of dark activity in cryptocurrencies,” she said. “We are actively engaging in anti-money laundering and countering the financing of terrorism. And that reinforces our determination to work on those two directions.”

Lagarde explained that following the 2008 financial crisis, regulatory agencies focused their attention on entities such as banks. However, she said that the prevalence of cryptocurrencies demonstrated that an “entity-based” regulatory framework is not sufficient and that the IMF and other regulators must take an “activity-based” approach to supervising cryptocurrency usage.

“I believe that it’s inevitable,” Lagarde said of cryptocurrency regulation. “We clearly have to move into an activity-based regulation. Forget about the entities, work on the activities themselves: who does what and who is licensed to do what and who is properly regulated and supervised.”

This statement is the latest development in Lagarde’s pivot from dismissing blockchain technology out of hand to diagnosing it as a threat to the global financial establishment.

In 2015, Lagarde told an audience of bankers that they did not need to worry about Bitcoin and poked fun at those who expressed concern about it.

By last year, however, she was warning that cryptocurrencies could bring “massive disruptions” and that bankers “it may not be wise to dismiss virtual currencies.”

Lately, Lagarde has begun latching onto cryptocurrency’s negative associations, trumpeting its perceived use in illicit transactions and the large amount of electricity that miners consume.

This negative public stance has coincided with a coordinated IMF push intended to promote an international framework for cryptocurrency regulation — a proposal that has been embraced by a variety of financial regulators from G20 nations.

While the new comments are largely in line with Lagarde’s already public views on cryptocurrency, it indicates the IMF may be moving to be more actively involved in preventing the illicit use of cryptocurrency.

On multiple occasions, Lagarde has previously cautioned that cryptocurrencies should be taken seriously and called for global cooperation among worldwide regulators. And she is not alone in voicing concerns over use of cryptocurrency in cross-border financial crimes.

Several large banks worldwide banned credit card purchases of crypto. On the other hand, the joint Commodities and Future Trading Commission (CFTC) and the US Securities Exchange Commission (SEC) hearing on Feb. 6 gave off the impression that future regulation must nurture the crypto sector instead of smothering it.

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