Here’s why IMF is calling for ‘global coordination’ to check Bitcoin’s surging popularity

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Updated: January 23, 2018 12:31:45 PM

Cryptocurrency especially Bitcoin's popularity has put the International Monetary Fund (IMF) in a tizzy. The International Monetary Fund is calling for ‘global coordination’ on cryptocurrencies as it warned of the risks from surging prices.

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Cryptocurrency was the flavour of the season in 2017. Even though the digital currency may have plunged in the first month of the new year, its craze among investors hasn’t waned. This is what has put the International Monetary Fund (IMF) in a tizzy. The International Monetary Fund is calling for ‘global coordination’ on cryptocurrencies as it warned of the risks from surging prices, Bloomberg reported. “Greater international discussion and cooperation among regulators, yes, would be helpful,” IMF spokesman Gerry Rice had told reporters  in Washington on January 19. While Rice didn’t elaborate on what type of coordination is needed, the push for action comes as digital currencies such as Bitcoin become an investment phenomenon and household name. “When asset prices go up quickly, risks can accumulate, particularly if market participants are borrowing money to buy,” Bloomberg reported Rice saying. “It’s important for people to be aware of the risks and take the necessary risk-management measures.”

Treasury Secretary Steven Mnuchin last week called for the Group of 20 nations to prevent cryptocurrencies from becoming the digital equivalent of an anonymous Swiss bank account. Earlier this month, Reuters also quoted Director of Germany’s central bank Bundesbank Joachim Wuermeling commenting that “effective regulation of virtual currencies would therefore only be achievable through the greatest possible international cooperation, because the regulatory power of nation states is obviously limited”. Managing Director Christine Lagarde earlier last year had cautioned that cryptocurrencies could eventually become a headache for central bankers as they increase in popularity.

Meanwhile in India, to regulate the trade of cryptocurrencies such as Bitcoins, the government has formed a committee to fast-track the process and form a law for the same according to The Hindustan Times report. This step follows the Indian authorities’ apprehension that black money is being used to trade in cryptocurrencies. The committee has representation from the departments of economic affairs, tax and from the RBI and the ED. Experts say Indians form around 10% of the total global trade in Bitcoin. Finance Minister Arun Jaitley had clarified that Bitcoin is not a legal tender in the country. The government on December 29 had cautioned investors to be wary of virtual currencies like Bitcoin, saying they are like Ponzi schemes with no legal tender and protection.

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