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What International Financial Institutions Think About Cryptocurrencies
13 August 2019 / Kanstantsin Nestsiarovich
What do BIS, IMF, World Bank, FATF and G20 have to say about cryptocurrencies? Doing Crypto Index Analyst has collected the positions of international financial institutions.
Because deals with cryptocurrencies can be cross-border, they are eyed not only by national governments, but also by international financial institutions. Some of them are in a position to impact regulatory policies of states, which makes the analysis of their positions quite relevant.

We have analyzed the positions of the Bank for International Settlements (BIS), the International Monetary Fund (IMF), the World Bank, the Financial Action Task Force on Money Laundering (FATF), and the Group of Twenty, and identified on which aspects of virtual currencies they focus, where their views converge and diverge, and which policies they propose in order to regulate the crypto-business.

Bank for International Settlements

The Bank for International Settlements (BIS) brings together central banks from 60 nations. The BIS's detailed position on cryptocurrencies was set out in one of its annual reports.

The BIS points to a number of weaknesses inherent in cryptocurrencies:

  • Cryptocurrencies require significant amounts of electricity to maintain a distributed ledger, which for its part can lead to an environmental disaster;
  • Cryptocurrencies, such as Bitcoin, are not easily scalable as the volume of the ledger grows along with the number of users, so transaction times and the burden on the Internet increases;
  • Volatility in the cost of cryptocurrencies also prevents their widespread dissemination;
  • Finally, trust in a decentralized system is limited. The reason for this is in the blockchain architecture itself: two parallel chains may emerge, and miners can jointly choose one as the right chain. Therefore, the user is challenged with the uncertainty about the completeness of the transaction.
The report also addresses the risks associated with the spread of cryptocurrencies:

  • Use in illicit transactions, including drug trafficking, terrorism financing and money laundering;
  • Vulnerability of crypto-exchanges to hacker attacks;
  • Prevalence of fraudulent ICOs.
Although the BIS report focuses largely on the weaknesses of cryptocurrencies and the risks associated with their spread, it does not call for a prohibitive policy. On the contrary, the paper states that reasonable regulation is called for: to develop taxation rules and ensure effective AML/CFT, regulation could focus on the point at which a cryptocurrency is exchanged into a sovereign currency.

The authors of the report also explored the Central Bank Digital Currency (CBDC), noting that currently many banks are experimenting in this area and it is possible to launch such digital currencies based on an exclusive distributed ledger. However, as noted by the BIS, the first results do not indicate that the CBDC will have any palpable advantages over the existing services. Later, in July 2019, Agustín Carstens, General Manager of the BIS, said that the organization is supporting CBDC-related research and projects of central banks, and their launch might occur in the near future.

The BIS has also released a special report focusing on Facebook's announcement of its own Libra cryptocurrency. The document notes that such projects generate new risks for the banking sector. On the one hand, large IT-companies' offering financial services can increase the efficiency and availability of such services. On the other hand, given the access to information and the infrastructure such companies possess, they will quickly introduce changes to the traditional landscape, becoming strong competitors to traditional banks. The BIS calls for international coordination to manage the negative implications of such projects, especially when it comes to competition and personal data protection.

Therefore, the BIS's view of cryptocurrencies is rather negative; the organization highlights the weaknesses of cryptocurrencies from both the technical and financial viewpoints, as well as potential for their use for criminal purposes. At the same time, the organization advocates moderate regulation aimed only at reducing risks and not contradicting business interests.

International Monetary Fund (IMF)

The IMF's attitude towards cryptocurrencies has modified over time. Initially, the organization noted their innovative potential and argued that they do not pose a threat to financial stability. Later on, however, they started making statements to the contrary about threats to financial institutions, vulnerability to cyberattacks and the possibility of using cryptocurrencies for illicit transactions.

In May 2018, the IMF released its annual report detailing the economic state of the world, in which it devoted a chapter to cryptocurrencies. The document reads that the market for cryptocurrencies is so small that it does not pose a threat to financial institutions. Shortly before the report was published, Christine Lagarde, Managing Director of the International Monetary Fund, released two publications containing both positive and negative assessments of cryptocurrencies. She pointed to their potential use for money laundering and the financing of terrorism. Christine Lagarde also said that cryptocurrencies enable fast and inexpensive settlements and ensure a "better balance between centralized and de-centralized service providers, and a financial ecosystem that is more efficient and potentially more robust in resisting threats." According to the IMF Managing Director, there is a need for an even-handed regulatory agenda, one that protects against risks without discouraging innovation.

The October report of the same year contained a more negative assessment of cryptocurrencies. The IMF highlighted their vulnerability to cyberattacks and made its point that the rapid growth of cryptocurrencies would threaten the economy. Christine Lagarde also shared the same viewpoint shortly before the publication of the report.

During the following month, when speaking at the Singapore FinTech Festival, Christine Lagarde supported central banks in issuing their own digital currencies. Among the advantages of CBDC she mentioned financial inclusion, security and consumer protection, and privacy in payments.

In April 2019, Christine Lagarde spoke about the negative implications of the spread of cryptocurrencies: she pointed to the changing business models of banks as evidence that cryptocurrencies are having a clear impact on financial sector incumbents. "We don't want innovation that would shake the system so much that we would lose the stability that is needed," she said.
Therefore, despite some fluctuations in its position, currently the IMF emphasizes the risks associated with the spread of cryptocurrencies.

World Bank

The organization takes a cautious stance, seeking to emphasize neither positive nor negative features of cryptocurrencies.

Researchers at the World Bank point out that, in terms of technology, cryptocurrencies are innovation and can compete with existing financial institutions. Cryptocurrencies, in their view, would enhance financial inclusion. However, there are also disadvantages: "volatility of the value of cryptocurrencies is a big obstacle to their becoming an alternative to legal tender." Overall, according to World Bank researchers, in the future, as rules of financial oversight are applied, consumer protection and taxation is ensured, as well as electricity consumption issues are effectively dealt with, cryptocurrencies can play an important role in the economy. The World Bank also appreciates the potential of blockchain technology, and successfully issued blockchain bonds in 2018.

In April 2019, the World Bank, in conjunction with the International Monetary Fund, launched Learning Coin, an internal educational blockchain token. The project is aimed to build "a strong knowledge base" around blockchain technology among staff at the organizations to recognize a growing knowledge gap between the legislators, policymakers, economists and the technology.

Financial Action Task Force on Money Laundering (FATF)

Due to the specific nature of its activities, the organization focuses on the threats associated with the illicit use of crypto for money laundering and terrorism financing, while noting the useful potential for the development of cryptocurrencies and their strengths. The FATF adopted this position as early as 2014 and is gradually proposing increasingly stricter and more stringent regulations for crypto exchanges.

The organization released a paper entitled "Virtual Currencies: Key Definitions and Potential AML/CFT Risks" back in 2014. Many potential opportunities related to the development of cryptocurrencies have been identified here: "Virtual currency has the potential to improve payment efficiency and reduce transaction costs for payments and fund transfers. For example, Bitcoin functions as a global currency that can avoid exchange fees, is currently processed with lower fees/charges than traditional credit and debit cards, and may potentially provide benefit to existing online payment systems, like PayPal." The FATF also notes that cryptocurrencies can enhance financial inclusion, notably in regions with fewer banks. However, the global reach and greater anonymity compared with other payment systems make cryptocurrencies a potential tool for money laundering and terrorism financing.

In 2015, FATF issued guidance with recommendations aimed at reducing the risks of the use of cryptocurrencies for criminal purposes. The organization mentioned the same benefits and risks associated with the proliferation of cryptocurrencies as in 2014. The report recommended that all exchanges should be listed and licensed, along with other financial institutions involved in money transfers. However, the FATF recognized the complexity of such regulation given the increased anonymity and irreversibility of cryptocurrency transactions.

The 2018 FATF report once again highlighted the link between cryptocurrencies and money laundering, fraud and drug trafficking.

In 2019, the FATF issued documents (and here) containing recommendations for member states to regulate cryptocurrencies. The essence of the proposed rules is to apply to cryptocurrency exchanges the same requirements as to other payment systems. Specifically, all crypto exchanges must transfer and store information about the senders and recipients of VCs. In some cases, this requirement is not technically feasible and may complicate the work of crypto exchanges, forcing them to either partially engage in "shadow" operations or deny services.

Group of Twenty

Discussions focused on cryptocurrencies within the G20 began in the spring of 2018. The member states recognized the innovative potential of the crypto industry, but noted the need to mitigate AML/CFT risks. The organization still keeps to this position and welcomes the regulatory measures proposed by the Financial Action Task Force on Money Laundering (FATF).

In its March 2018 communiqué, G20 highlighted the need for close attention to cryptocurrencies and an international approach to their regulation. The paper notes that technological innovation, including that underlying crypto-assets, has the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly. At the same time, "crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing." The G20 countries called on the Financial Stability Board (FSB) and the FATF to prepare a report on their work on cryptocurrencies for the next summit.

Later, in July 2018, G20 reaffirmed its position on cryptocurrencies and its intention to regulate the industry in accordance with the FATF standards. G20 also called on the FATF to clarify how these rules can be applied to the crypto industry.

In December 2018, G20 reiterated the need to regulate the circulation of cryptocurrencies in order to combat money laundering and terrorism financing. According to G20 members, these measures should be put in place within the framework of promoting sustainable financial system development.

Finally, as a result of the meeting in June 2019, G20 issued a communiqué stating that the organization welcomes the essential role of the FATF in setting global standards for preventing and combating money laundering, terrorist financing and proliferation financing with the use of cryptocurrencies. The statement also confirmed G20's earlier position: "Technological innovations, including those underlying crypto-assets, can deliver significant benefits to the financial system and the broader economy. While crypto-assets do not pose a threat to global financial stability at this point, we remain vigilant to risks, including those related to consumer and investor protection, anti-money laundering (AML) and countering the financing of terrorism (CFT)." In other words, while the FATF requirements supported by the organization may have the opposite effect, the G20 policy is aimed at balanced regulation, which seeks to both reduce the risks associated with cryptocurrencies and allow for business interests.


Negative assessments prevail in the discourse of key global financial institutions focused on cryptocurrencies. Clearly negative views are voiced by the BIS, IMF and FATF. They highlight the weaknesses of cryptocurrencies and threats associated with their use: volatility, energy consumption of mining, threats to financial stability and use of cryptocurrencies for criminal purposes. Emphasizing their negative assessments, these organizations also point to the benefits of cryptocurrencies, for example, the role of cryptocurrencies in improving financial inclusion and their efficiency as payment systems. The World Bank and G20 point to both positive and negative characteristics of cryptocurrencies, without making any highlights.

Despite the negative attitude of the discourse, none of the organizations analyzed in this report advocate prohibitive regulatory measures in the field of cryptocurrencies. They support reasonable regulation, focusing primarily on reducing the risks of using cryptocurrencies for criminal purposes: money laundering, terrorism financing, fraud and drug trafficking.