International Monetary Fund (IMF) Chief Christine Lagarde joins the voices of many bank and world leaders who are calling for Bitcoin to be regulated.
The chief called on regulators who have had to battle with policing the growing popularity of bitcoin and said it was time for them to “fight fire with fire”
Writing in an IMF blog post, Lagarde emphasized that the same blockchain technology that powers Bitcoin and other cryptocurrencies could be used to regulate the market and keep bad actors from using the digital currency for illegal means.
In a statement, Lagarde said
We can harness the potential of crypto-assets. The same innovations that power crypto-assets can also help us regulate them. To put it another way, we can fight fire with fire. Regulatory technology and supervisory technology can help shut criminals out of the crypto world
All cryptocurrencies like Bitcoin operate using the distributed ledger technology, which essentially creates a global network of computers to jointly manage the database that records all transactions. The technology is thought to be incorruptible, easily bypass censorship and enforces transparency in all its transactions.
Around the world, blockchain technology is already being used outside of Bitcoin. Last year, the United Nations World Food Programme (UNWFP) sent cryptocurrency-based vouchers to over 10,000 Syrian refugees for food. It is also seen by many as a cheaper alternative for those who cannot open bank accounts to still send and receive money. According to MIT Media Lab, blockchain technology can also be used to accelerate government functions and keep it from being susceptible to corruption.
Lagarde says it’s not wise to dismiss crypto-assets because of the potential the technology holds. To resolve this, the best way is to use the same technology that powers bitcoin to keep it in check. She noted that in terms of regulation, the technology could be used to verify customer information and create registries with digital signatures that could safeguard the legitimacy of transactions.
Regulators Are Slowly Embracing Blockchain Technology
Many countries are already acknowledging the potential of Bitcoin and are moving to regulate the digital currency market. Canada is looking to regulate bitcoin under counter-terrorist financing and anti-money laundering laws while Mexico is looking to regulate Bitcoin as a virtual asset under their Fintech Law.
Bitcoin and blockchain is making strides in the mainstream finance industry. The technology will be included in the agenda of the 2018 G20 Buenos Aires Summit and the Bank of England will present a report regarding the tests it has conducted to use the technology in the British payments system.