January 22, 2016
The International Monetary Fund (IMF) staff released a paper today that talks about the problems and risks associated with virtual currencies (VCs) and how can the financial industry could benefit from virtual currencies, if it is regulated. For those who might not be familiar, The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Created in 1945, the IMF is governed by and accountable to the 188 countries that make up its near-global membership. The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. And to serve this purpose, IMF realized the increasing popularity of virtual currencies and a need to regulate them as soon as possible.
The paper on virtual currencies talks about how virtual currencies have many potential benefits, including greater speed and efficiency in making payments and transfers, particularly across the globe and how the distributed ledger technology (blockchain) underlying some VC schemes (bitcoin) has a bigger potential to bring a transformation in the financial industry. However the IMF is worried about the fact that virtual currencies like bitcoin have potential risks that make money laundering, terrorist financing, tax evasion and fraud easier to execute.
Pointing out these risks, the paper emphasizes the legal and regulatory aspects of virtual curren ...