Bitcoin trading contains 'element of speculation', says IMF Chief Christine Lagarde

Amid the rising popularity of bitcoins and other form of cryptocurrencies, the International Monetary Fund Managing Director noted that cryptocurrency regulation is 'inevitable'.

Managing Director of the IMF, Christine Lagarde (File | Reuters)

NEW YORK: Amid the rising popularity of bitcoins and other form of cryptocurrencies, International Monetary Fund (IMF) Managing Director Christine Lagarde noted that cryptocurrency regulation is “inevitable”.

In an interview to CNN held on the sidelines of the World Government Summit in Dubai, Lagarde said “We have had an entity-based regulation over the past ten years. After the financial crisis, we clearly have to move into an activity-based regulation, forget about the entities, work on the activities themselves, who does what, who is licensed to do what and who is properly regulated and supervised.”

Talking about bitcoin dealings, Lagarde opined that such trade contained an “element of speculation”, adding that much needs to be revealed regarding the “dark activities behind that particular scene.”

“Bitcoin trade tells us a bit about the herd mentality, number one. It tells us a lot that people are looking for this high yield product and there is an element of speculation about that. It also tells us there is probably quite a bit of dark activities behind that particular scene,” she said.

However, the IMF chief assured active engagement in anti-money laundering and countering the financing of terrorism, which, she claimed, reinforces the determination to work in those two directions.

Talking about the growth forecast, Lagarde said the IMF projected an increase of growth in the short term this year. However, in the next year, Lagarde said there will be a clear impact on growth, since a lot of investment is anticipated because of the full deduction of expenditure.

“The risk of inflation would be linked to the fact that growth is being pushed, that salaries are higher because the US economy is working well and on many cylinders at the moment,” she argued.

Lagarde also maintained that deflationary tendencies may continue to sustain.