IMF Fears Cryptocurrencies May Circumvent Capital Controls

Besides bitcoin, litecoin and ripple the IMF also takes a swipe at blockchain-based smart contracts developments Ethereum and Codius.
Photo: (Photo: Bloomberg)

The International Monetary Forum (IMF) has presented a report on cryptocurrencies to the financial leaders gathered at Davos for the yearly World Economic Forum meeting. The IMF report mainly tried to explain the uses, potential and development of blockchain technology. However, it also seems to focus a great deal on dangers to the established system as a scare tactic to bring regulators in different countries to cooperate globally.

“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,” says IMF managing director Christine Lagarde. “The challenge will be how to reap all these benefits and at the same time prevent illegal uses, such as money laundering, terror financing, fraud, and even circumvention of capital controls.”

With regard to the other risks of the widespread adoption of cryptocurrencies the IMF fears, the report says that they may “over time pose a serious challenge to parts of the business model of the established financial system.” Cryptocurrencies and distributed ledger technologies will thus continue to attract the attention of policymakers and regulators at both the national and international levels, the report concludes.

The IMF also takes a swipe at blockchain-based smart contracts developments saying they are still at an early stage, with many unsolved problems including reliably observing and integrating external events. “Several platforms such as Ethereum and Codius seek to apply the blockchain technology to execute smart contracts.  No viable smart contract systems have yet emerged.”

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