IMF Makes G-20 Push to police the 'dark side' of cryptocurrencies

Push to police the 'dark side' of cryptocurrencies

The world's financial leaders will call on international standard-setting bodies on March 20 for stronger monitoring of crypto-assets and to assess the need for a multilateral response as such assets could at some point threaten financial stability.

The call appears in a draft communique prepared for the meeting of finance ministers and central bank governors of the world's 20 biggest economies in Buenos Aires on March 19-20, seen by Reuters.

Regulators globally have raised the alarm over cryptocurrencies.

The financial leaders will say the technological innovation behind cryptocurrencies has the potential to improve the efficiency and inclusiveness of the financial system.

"Cryptocurrencies, however, raise issues with respect to consumer and investor protection, tax evasion, money laundering and terrorist financing. At some point they could have financial stability implications," the draft communique adds.

"We agree that international standard-setting bodies strengthen their monitoring of crypto-assets and their risks ... and assess whether multilateral responses may be needed."

IMF Makes G-20 Push to Police `Dark Side' of Crypto-Currencies

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.

See what central banks are doing about digital currencies

“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.”

International Monetary Fund managing director Christine Lagarde said the IMF could play a central role in co-ordinating the global regulation of cryptocurrencies. In a blog post, she cautioned about the "dark side" of digital cash and its potential to finance terrorism or facilitate money laundering.

"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."

In a statement, the SEC said these "potentially unlawful" platforms may be giving investors an unearned sense of safety by labelling themselves as "exchanges". The regulator said these platforms needed to register with the SEC as a regulated national securities exchange or as an alternate trading system, or ATS.

Virtual currencies have existed for years but speculation in them has recently ballooned - along with scams promising investors returns of over 1000 per cent in weeks.

In a time of volatile markets, hackers are also active in the sector.

Bitcoin, the best known virtual currency, lost over half its value earlier this year after surging more than 1300 per cent last year.

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