The head of the International Monetary Fund (IMF), Christine Lagarde, has said regulators should use blockchain technology to curb the “peril that comes along with the promise” of cryptocurrencies.

“The same innovations that power crypto-assets can also help us regulate them. To put it another way, we can fight fire with fire,” Lagarde wrote in an IMF blog post on Tuesday.

Lagarde warned that cryptocurrencies could create financial instability, as well as facilitate terrorism and money laundering, arguing that distributed ledger technology and cryptography could be used in internationally coordinated regulatory efforts.

Distributed ledger technology, she claimed, “can be used to speed up information-sharing between market participants and regulators.”

Lagarde wrote:

“Those who have a shared interest in maintaining safe online transactions need to be able to communicate seamlessly. The technology that enables instant global transactions could be used to create registries of standard, verified, customer information along with digital signatures. Better use of data by governments can also help free up resources for priority needs and reduce tax evasion, including evasion related to cross-border transactions.”

In the post, Lagarde also said that cryptography, in addition to AI and biometrics, could be used to “remove the “pollution” from the crypto-assets ecosystem.”

According to Lagarde, these technologies, “can enhance digital security and identify suspicious transactions in close to real time. This would give law enforcement a leg up in acting fast to stop illegal transactions.”

The IMF managing director went on to suggest that regulators should look toward the frameworks of the Financial Action Task Force (FATF) and the Financial Stability Board to inform their own rules.

The views expressed in the blog post largely align with Lagarde’s previous comments on cryptocurrencies, though the literal fiery rhetoric could indicate that the IMF is seriously entertaining intervening in the crypto industry sooner rather than later.

Christine Lagarde image via Shutterstock