IMF calls for international cryptocurrency co-ordination

International Monetary Fund spokesman Gerry Rice has said that “greater international discussion and co-operation among regulators… would be helpful”

What has happened?

The International Monetary Fund (IMF) has called for global co-ordination on cryptocurrencies and warned of the risks of surging cryptocurrency prices.

What does this mean?

According to Bloomberg, IMF spokesman Gerry Rice said last week that “greater international discussion and co-operation among regulators… would be helpful”.

Rice did not elaborate on what co-ordination is needed, but the impetus for action comes from the rise in popularity of virtual currencies, such as bitcoin.

The spokesman also warned of the risks attached to virtual currencies, citing investors' losses and the use of virtual currencies in money laundering and other illicit activities.

“When asset prices go up quickly, risks can accumulate, particularly if market participants are borrowing money to buy,” Rice said.

“It’s important for people to be aware of the risks and take the necessary risk management measures… Cryptocurrencies can pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud.”

In September 2017, IMF Managing Director Christine Lagarde said that cryptocurrencies could become a headache for central banks and that "it may not be wise to dismiss" them.

More recently, at the Davos summit this month, Lagarde told journalists that governments and banks will seek to further control virtual currencies.

She said:

"The anonymity of it is likely to facilitate money laundering, dark money moving around and things that no one is happy about if you’re looking for financial stability and transparency of financial transactions.

"There will be innovations, there will be changes, there will be newcomers. What needs to change is our regulatory approach. We cannot continue looking at things."

She also made the point that bitcoin mining is energy hungry.

"We figured that in 2018 if it continues, that system will likely consume as much energy as Argentina. That’s big and in times of climate change, it’s a big concern."

The IMF is not alone in recommending greater co-ordination on digital currencies.

US Treasury Secretary Steven Mnuchin last week also called for the G20 to prevent cryptocurrencies from becoming the digital equivalent of an anonymous Swiss bank account.

“We want to make sure that bad people cannot use these currencies to do bad things,” he said.

Next steps

If you want to take advantage of blockchain's huge potential and disruptive impact, while avoiding falling foul of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.

Contacts
John Salmon
Partner
London

 

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