On January 20, 2016 at the World Economic Forum in Davos, during the panel on Transformation of Finance, the International Monetary Fund (IMF) released a paper titled “ Virtual Currencies and Beyond: Initial Considerations .”
“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,” said 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.”
The paper is presented as a “Staff Discussion Note.” These documents showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate, with the disclaimer: “The views expressed in Staff Discussion Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.” Plausible deniability all the way, but presenting the document at Davos seems to strongly suggest some degree of official support.
A key conclusion of the paper is that the distributed ledger concept has the potential to change finance by reducing costs and allowing for deeper financial inclusion in the longer run, states the IMF press release . This could be especially important for remittances, where transaction costs can be high, around 8 percent. Distributed ledgers can also shorten the time required to settle securities transactions, which currently take up to three days, as well as lower counterparty and settlement risks.
At the same time, notes the IMF paper, virtual currencies based on distributed ledger technology can also serve as vehicles for money laundering, terrorism financing and tax evasion. Achieving a balanced regulatory framework that guards against risks without suffocating innovation is […]
