“It’s inevitable,” she told CNNMoney emerging markets editor John Defterios. “It’s clearly a domain where we need international regulation and proper supervision.”

“There is probably quite a bit of dark activity [in cryptocurrencies],” she added at the World Government Summit in Dubai on Sunday. Lagarde said that the IMF is actively trying to prevent digital currencies from being used to launder money or finance terrorism.

But she argued that regulators need to focus less on entities, and more on activities — who is doing what, and whether they’re properly licensed and supervised. Digital currencies have largely operated in a regulatory vacuum since bitcoin’s debut in 2009.

But governments and central banks are starting to pay closer attention, warning investors about potential scams. In December, the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation started to crack down on alleged fraud in fundraising by some cryptocurrency companies and traders. In Asia, where cryptocurrency is particularly popular, China and South Korea have both cracked down on cryptocurrency trading.

Concerns about new restrictions, and rumors over a potential ban in India, have fueled volatility in digital currency prices. Related: Two bitcoin traders charged with fraud Top government officials at the World Economic Forum in Davos also signaled that more regulation could be on its way. Read more from money.cnn.com…

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