Daily Management Review

IMF says it’s ready to regulate the cryptocurrency market but banks are still cautious


03/14/2018


The head of the International Monetary Fund, Christine Lagarde, believes that regulators should use the blockchain to combat "danger that comes with promises" associated with crypto-currencies.



Lagarde argues that crypto-currencies can cause financial instability, and can also be used to finance terrorism and money laundering. Regulators should use the technology of the distributed registry and cryptography at the world level, she says.

In particular, distributed registry technology can be used to "accelerate the dissemination of information between market participants and regulators."

"Those who are interested in maintaining the security of online transactions need to have the means to communicate seamlessly. The technology that allows instant global transactions can be used to create standardized and verified customer data registers containing digital signatures." If governments learn to better manage data, it will help to free resources for fulfilling priority tasks and reduce the risks of avoiding paying taxes," Lagarde writes.

She also stated the need to take action in response to existing risks, noting that the IMF can play a central role in this process.

"No country can cope with this threat alone," she said, "The IMF has a unique position as a forum for finding answers to questions about the crypto currency market."

Heads of central banks and financial departments of the G20 states will discuss regulation of the cryptocurrency market during the forthcoming meeting in Buenos Aires next week.

Lagarde's proposals for regulating the crypto currency market include consumer protection measures, use of biometrics, cryptography and artificial intelligence tools to quickly identify suspicious transactions, and introduction of uniform rules for the market in different countries.

The head of the IMF also noted that "rejecting crypto-currencies would not be wise." "We should welcome their potential, but be aware of the risks," she said.

In the meantime, financial institutions and banks are still not sure what to do with cryptocurrencies. Some fear to apprpoach the new market, calling digital tokens too risky business to deal with.

JPMorgan Chase, for example, follows this rhetoric. Not long ago, the bank has released an annual statement. The paper states that cryptocurrencies may well become a new strong player that would force financial institutions to compete for their place in the sun, Fortune reports.

JPMorgan states that there is a risk that processing of payments and some other services can be altered by crypto-currencies since they do not require services of intermediaries. JPMorgan Chase believes that the volume of start-ups related to cryptocurrency will grow. So, it is necessary to compromise in order to find new clients and keep existing ones.

The bank has already had to put money in adjusting or changing its own products, yet possible competition can push on on prices and fees in products and services and end up with a loss of the bank's market share, the authors of the report write.

Bank of America also said that cryptocurrencies put competitiveness of the bank at risk. Goldman Sachs agrees, calling cryptocurrencies too risky for its business.

At that, Goldman Sachs is convinced that centralized state cryptocurrencies can prove their "utmost usefulness."

source: reuters.com, fortune.com






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