Track Cryptos with Blockchain to 'Fight Fire with Fire — IMF's Lagarde

IMF Managing Director Christine Lagarde

Lagarde warned that cryptocurrencies could create financial instability, as well as facilitate terrorism and money laundering, arguing that distributed ledger technology and cryptography could be used in internationally coordinated regulatory efforts.

In terms of specific ways to enact regulations that will protect consumers in the crypto markets, Lagade writes that one must "fight fire with fire". New, low-cost payment methods could empower millions of people in low-income countries who lack traditional bank accounts.

Christine Lagarde, has said regulators should use blockchain technology to curb the "peril that comes along with the promise" of cryptocurrencies.

For Lagarde, the biggest concern is the anonymity that makes crypto assets so attractive to many.

Explaining that their anonymity is what makes cryptocurrencies both attractive and risky, 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. She mentions the example of darknet marketplace Alphabay, which had more than $1 bln exchanged through crypto on its platform by the time it was shut down in July 2017. While the International Monetary Fund has tried to help its member countries with the issues, Lagarde said "more needs to be done to get a handle on the emerging threat". 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. "The technology that enables instant global transactions could be used to create registries of standard, verified, customer information along with digital signatures".

Applying the same securities rules to crypto assets as standard securities also can help increase transparency and alert buyers to potential risks.

"To be truly effective, all these efforts require close worldwide cooperation". She also spelled out a raft of research already undertaken to measure the threat posed by crypto assets and to widen the regulatory net.

Lagarde is the latest senior financial figure to issue a warning over the potential dangers of bitcoin, as well as to hail the potential of the technology behind it.

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