Christine Lagarde, head of the International Monetary Fund (IMF), wrote an article about virtual currencies. The article is entitled ‘A Regulatory Approach to Fintech: Guarding Against Emerging Risks Without Stifling Innovation.’ In the article, she talked positively about virtual currencies.
Christine Lagarde Says Crypto Assets Shouldn’t Be Dismissed
Christine Lagarde seems to recognize the potential that virtual currencies have to change the world. In the article, she mentions the good and bad things about virtual currencies. At the same time, Lagarde talks about the challenges that these virtual currencies have to face.
She explains that although financial technologies pose risks, they offer considerable promises. For example, blockchain technology could enable faster and cheaper transactions.
About it, she wrote:
“Financial technology offers considerable promise, but it also poses risks. Consider distributed ledger technology, which underpins crypto-assets. It can enable faster and cheaper transactions, store records securely and execute so-called smart contracts automatically. But the technology has also been used for illicit purposes.”
Regulators are also facing a difficult task. If some regulations are implemented, the technology would not be able to spread and improve. However, if no regulation is implemented at all, investors are at risk and fraudsters could benefit from it.
Lagarde explains that regulators must protect consumers and investors. Tax evasion, fraud, money laundering and the financing of terrorism are the things these regulators want to control. However, if they impose very tight regulations, the crypto and blockchain market could not have enough space to evolve.
This is why engaging with market participants could be a good way to avoid harming innovation but identifying risks. That is, developing a forward-looking regulatory framework that includes creativity, flexibility and expertise.
“So far, national authorities have reacted with varying degrees of regulatory stringency,” she commented. “If this uncoordinated response continues, activity will simply migrate towards more lightly regulated jurisdictions in a race to the bottom.”
These digital assets are global and know no boundaries. Malta, for example, was able to create a very interesting approach towards virtual currencies. Being in the European Union (EU), the island attracted crypto and blockchain enterprises to settle their operations in the country.
Moreover, Lagarde mentioned that the Financial Action Task Force (FATF) has also provided guidance to its members about how to address money-laundering and terrorist financing risks.
Finally, she says that it is important to keep an open mind about virtual currencies and fintech. Although they pose several risks, they also have the potential to improve society and our daily lives.
Carlos is an international relations’ analyst specializing in cryptocurrencies and blockchain technology. Since 2017, Carlos has written extensively for UseTheBitcoin and other leading cryptocurrency sites; with over 2,000 articles published.