Ever since the start of 2018, regulatory bodies from around the globe are seen taking some serious measures sighting increasing issues of money laundering and tax evasion. However, with each country having a different set of rules while dealing with cryptocurrencies, it is becoming increasingly difficult for everyone to arrive at a common platform.
On Tuesday, March 13, head of the International Monetary Fund (IMF), Christine Lagarde, proposed the idea of using the blockchain technology itself in order in order to monitor and control the flow of digital currencies being used for illicit activities of money laundering and terror funding.
In an IMF blog post, Lagarde wrote: “The same innovations that power crypto-assets can also help us regulate them. To put it another way, we can fight fire with fire. We can harness the potential of crypto-assets while ensuring that they never become a haven for illegal activity or a source of financial vulnerability.”
Lagarde also mentioned that terror funding and money laundering are not the only issues to be addressed. The rapid growth of digital currencies and its extreme volatility and speculative behavior pose a serious threat while disturbing the overall financial stability and thereby creating new vulnerabilities.
While talking about how to make the optimized use of Distributed Ledger Technology (DLT), Lagarde said that it can be very much helpful “to speed up information-sharing between market participants and regulators.” She further added that “Those who have a shared interest in maintaining safe online transactions need to be able to communicate seamlessly.”
“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,” said Lagarde.
Lagarde also talked about using other technologies like Artificial Intelligence (AI), Biometrics and cryptography for identifying and tracing out suspicious transactions as well as enhancing the digital security. These new emerging technologies she said can be very much helpful to curb the unlawful means of the use of digital currencies.
Lagarde also mentions that regulators need to ensure that there is uniformity in rules that are being framed for digital as well as non-digital transactions in order to ensure transparency in the process. However, Lagarde again reiterated her previous stand saying that all these things need a collective effort from the global financial community and an international cooperation. She clearly emphasized that no country can handle this challenge alone.
The IMF chief further suggested that regulators should look forward to the exceptional work done by the Financial Action Task Force (FATF) and the Financial Stability Board, in order to form their own set of rules.
In her concluding note, Lagarde writes that there are a lot of theories floating with critics saying whether digital currencies could be the next big bubble and the promoters saying it to be next big revolution in the financial sectors. She said that certainly, the outcome lies between the two extremes. Finally, she added that “As I have said before, it would not be wise to dismiss crypto-assets; we must welcome their potential but also recognize their risks.”