IMF Urges for Global Cooperation on Cryptocurrencies

Bitcoin’s unprecedented growth in its price was the major reason for its popularity. Bitcoin has managed to draw the attention of several big banking giants and other financial institutions alike. It was seen that in addition to Bitcoin, by the end of 2017 many other cryptocurrencies like Ethereum, Ripple, Litecoin, Dash and others managed to gain a lot of limelight in the crypto market.

However, at this point in time, the global crypto market looks like quite a scattered one. Where some big countries are seen openly embracing the crypto revolution, others are denouncing it due to several reasons like extreme volatile behaviour, use for illicit activities like tax evasion and money laundering. As a result of the difference in opinion, there is no unanimity in treating cryptocurrencies across the globe.

The International Monetary Fund (IMF) has recently asked countries to arrive on one common platform and have “greater international discussion and cooperation among regulators” while dealing with cryptocurrencies. This United Nations recognized organization works to maintain financial stability with global monetary cooperation.

As per the latest report from Bloomberg, Gerry Rice – an IMF spokesperson – talked about both the merits and risks associated with cryptocurrencies. Rice said: “Cryptocurrencies can have potential benefits, including the promotion of financial inclusion and more efficient payment and settlement processes.”

However, further pointing to the use of these decentralized digital currencies for virtual activities, Rice said: “Cryptocurrencies can pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud.”

Rice also talked about the extremely volatile nature of the cryptocurrencies and how it can affect several gullible investors who usually get swayed by looking at the market momentum. Rice said: “When asset prices go up quickly, risks can accumulate, particularly if market participants are borrowing money to buy. It’s important for people to be aware of the risks and take the necessary risk-management measures.” Hence, Rice stated that “Greater international discussion and cooperation among regulators, yes, would be helpful.”

IMF is not, however, the first institution to seek support in this matter.Last week, Steven Mnuchin, the U.S Treasury Secretary called for a similar global cooperation to prevent cryptos from turning out to be the digital equivalent of anonymous Swiss bank accounts. Mnuchin stated that the U.S. wants to ensure “bad people cannot use these currencies to do bad things.”

IMF chief Christine Lagarde, has previously talked about cryptocurrencies. Last year in 2017 while addressing at the World Economic Forum, Lagarde presented a report named “Virtual Currencies and Beyond: Initial Considerations” which highlight important things about cryptocurrencies. It read ‘virtual currencies and their underlying technologies can provide faster and cheaper financial services and can become a powerful tool for deepening financial inclusion in the developing world.’

Later that year in September 2017, Lagarde asked that everyone should come together to decide on cryptos before they become a headache for banking institutions. Now that cryptos have already managed to enter into the mainstream Lagarde said that “it may not be wise to dismiss virtual currencies.”

It is expected that at the ongoing World Economic Forum 2018, big financial institutions and countries together will hold some important talks on this matter.