Governments should consider offering their own cryptocurrencies to prevent the systems becoming havens for fraudsters and money launderers, Christine Lagarde, head of the International Monetary Fund said referring to the fast-growing fintech industry.
Lagarde said central banks had to work quickly to establish digital cash for burgeoning networks of private financial transactions or risk their mushrooming into trading networks that were inherently unstable.
A system regulated by central banks could become the basis for a rapid expansion of financial services to developing world countries and the poorest people in western societies without the risks associated with privately managed digital currencies, she said.
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The IMF’s proposal is likely to be greeted warily by many digital currency operators who believe one of the main attractions of their technology is that it lies outside the mainstream banking system. The involvement of a central bank could also be seen as imposing heavy-handed regulation that would slow down transactions and raise costs.
However, businesses wishing to use the underlying blockchain technology to process transactions are likely to welcome the IMF’s endorsement and the involvement of central banks in preserving the integrity of new financial systems.