"These digital offerings are typically built in a decentralized way and without the need for a central bank," Lagarde wrote on Tuesday. "This gives crypto-asset transactions an element of anonymity, much like cash transactions. The result is a potentially major new vehicle for money laundering and the financing of terrorism."
While an international set of rules could take years to develop, Lagarde recommended that financial regulators begin adapting advanced technologies to police cryptocurrency movements.
Lagarde also recommended using biometrics, artificial intelligence and cryptography to identify suspicious transactions in "near real time" to help law enforcement block illegal exchanges.
IMF chief cited the July 2017 US-led shut-down of AlphaBay, the largest online criminal market place, as an example of international cooperation to battle crime.
Before the site was taken offline, more than $1 billion had been exchanged through crypto-assets to buy and sell illegal drugs, hacking tools, firearms and toxic chemicals, Lagarde noted.