Bitcoin to come under MORE regulation to protect global finance from criminal activity

Bitcoin and competitors Ripple and ethereum saw prices collapse after the South Korean Government announced it would seek to regulate cryptocurrency transactions.

Bitcoin skyrocketed to a whopping $20,000 shortly before Christmas but prices have steadied around $11,000 since the announcement.

But Mrs Lagarde said more governments and banks will seek to further control the way bitcoin is used to protect financial stability.

She said: “The anonymity of it is likely to facilitate money laundering, dark money moving around and things that no one is happy about if you’re looking for financial stability and transparency of financial transactions.

“There will be innovations, there will be changes, there will be newcomers. What needs to change is our regulatory approach. We cannot continue looking at things.”

Bitcoin is a cryptocurrency not controlled by a single administrator and can be used to buy things worldwide electronically. 

Bitcoin’s popularity has caused demand to skyrocket throughout 2017, pushing other cryptocurrencies like Ripple and ethereum to also reap the benefits of the cryptocurrency craze.

South Korea announced plans to “legalise” cryptocurrency trading for registered real-name accounts only in a bid to tackle anonymity in trading. Real names will have to be used starting from January 30.

The IMF President also said that other than the financial security risks, bitcoin could threaten to worsen climate change because of the amount of energy used for bitcoin mining.

She continued: “Bitcoin mining, which is this accelerated use of computers to actually determine the value and incentivise the functioning of the mechanism, is energy hungry.

“We figured that in 2018 if it continues, that system will likely consume as much energy as Argentina. That’s big and in times of climate change, it’s a big concern.”

But Mrs Lagarde revealed some banks are looking into using bitcoin’s support technology, the blockchain, to create their own cryptocurrency and establish a transparent system to monitor transactions.

The blockchain is a system that allows the transmission of digital information but blocks attempts to copy the data.

Speaking to Bloomberg from the World Economic Forum in Davos, the IMF boss continued: “What is fascinating about the bitcoin movement is the technology that is underneath. This technology guarantees identification, trustability, authentification of transactions without interference, without intermediation.

“That’s fascinating and could be used in multiple circumstances: tracing transactions, land registry, you just name it. And some central banks are looking at it to use for their own cryptocurrency.”

According to Coindesk, bitcoin was trading for $11,182.66 at 12.29pm GMT on January 25. Ripple’s price was recorded at $1.33 at while competitor ethereum traded for $1,053.52 at 12.29pm.

The prices of the three cryptocurrencies are all on the rise over the last 24 hours but Bill Winters has warned the prices could soon fall.

The CEO of Standard Chartered said he could not see any way where the cryptocurrencies and Blockchain were not going to be looked into by authorities. 

He said: “We think it is very real, it is fundamental. We have got some extremely interesting early stage developments how clearing currency pairs with disrupted technology. 

“The cryptocurrencies themselves I imagine will find themselves quite regulated.”

The crypto community will be watching on as world leaders discuss ‘The Crypto-Asset Bubble’ at Davos today. The Speakers are expected to tell the audience that regulation is needed to stop money laundering, terrorism and cyber-crime.

The speakers are Jennifer Zhu Scott, Neil Rimer, Cecilia Skingsley, Yang Yanqing and, Nobel-prize winning economist Robert J. Shiller, who has made his position quite clear in the past.