Use Blockchain Tech to Counter the Dangers of Cryptocurrencies: IMF Head
IMF’s Lagarde suggests fighting “fire with fire” by employing blockchain technology to curb the criminal usage of cryptocurrencies.
Christine Lagarde, chief of the International Monetary Fund (IMF), has suggested that the blockchain technology underlying cryptocurrencies should be used to aid the crackdown on illegal usage of crypto.
In a blog post published on the IMF site today, titled ‘Addressing the Dark Side of the Crypto World’, Lagarde acknowledged the advantages and potential of blockchain technology (such as its ability to provide financial inclusion and bank the unbanked worldwide), but stressed that it is also essential to take into account “the peril that comes along with the promise”.
Explaining that their anonymity is what makes cryptocurrencies both attractive and dangerous, Lagarde stated that it is this anonymity that makes digital currencies a potential new tool for conducting illegal activities such as money laundering and terrorism financing.
In addition to their usage in criminal activities, cryptocurrencies also pose the risk of financial instability; their extreme volatility, unregulated nature, and the lack of clear definition and classification of crypto assets all leave investors exposed to financial vulnerability.
To combat the growing threat posed by cryptocurrencies, Lagarde suggests:
“… the same innovations that power crypto-assets can also help us regulate them. To put it another way, we can fight fire with fire. Regulatory technology and supervisory technology can help shut criminals out of the crypto world.”
To do so, she offers two example solutions. The first is Distributed Ledger Technology (DLT), which can be used to create and maintain customer information and verify communication via digital signatures – all contributing to safer and seamless information-sharing between stakeholders. The second is technologies such as biometrics, artificial intelligence, and cryptography.
Ultimately, Lagarde notes that creating a regulatory framework for cryptocurrencies, similar to the one that exists for traditional markets and non-digital transactions, is an endeavor that requires a collective global effort:
“To be truly effective, all these efforts require close international cooperation. Since crypto-assets know no borders, the framework to regulate them must be global as well.”
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