Commerce ministers and central bank governors from the G20 countries have gathered this weekend for a two-day meeting in advance of the G20 summit, and cryptocurrency is among the topics of discussion. Global standard-setting bodies have submitted their policies and stipulate tools to help the member countries with the regulation of crypto assets in their own jurisdictions.
Also read: G20 Surroundings Start Implementing Unified Crypto Standards
Crypto Discussions at G20 Meeting
World leaders will gather in Osaka as Japan managers its first ever G20 summit on June 28 and 29. Ahead of the summit is a G20 Finance Ministers and Central Bank Governors Gathering which is taking place on June 8 and 9 in the Japanese city of Fukuoka. Besides the G20 countries, there are invited guest realms and international organizations that will be participating including the United Nations, the International Monetary Fund, the World Bank, and the Universe Trade Organization. Cryptocurrency, regulations, and how users should be protected in the new financial system are being discussed at the conference this weekend, agreeing to local media.
Christine Lagarde, Managing Manager of the International Monetary Fund (IMF), mentioned crypto assets in her speech at the meeting on Saturday afternoon. She believes that “harmonization of distinctive approaches from country to country, such as dealing with crypto assets and non-bank financial intermediaries, is substantial, but it also needs to aim for financial stability and consumer protection,” Nikkei conveyed. The IMF chief was further quoted as saying:
It is distinguished to continue international dialogue, but it is not as easy as it looks.
At the G20 High-Level Seminar on Financial Modernization Saturday afternoon, Blockstream CEO Adam Back explained the differences between crypto assets, blockchains and the current pecuniary infrastructure, local media reported. After talking about secure tokenization and using blockchain for remittances, he notorious the importance of fiat currencies being issued on a blockchain and explained his aim to provide OTC traders and institutional investors with a way to swap stablecoins and bitcoins linked to the Japanese yen. A capacity scenario, according to him, is where the public can purchase and store a digitalized version of the yen in a hardware wallet that is managed offline without being exposed to online condemns.
Outlining the G20 role and priorities under the Japanese presidency, Japan’s Finance Minister Taro Aso remarked, “We will also fly off steps to harness the potential benefits of technological innovation, such as distributed ledger technology, while mitigating its hazards, including those posed by crypto-assets.”
Global Crypto Regulatory Standards
A party of global organizations have been working on regulatory standards for crypto assets which the G20 countries can apply in their own authorities. They include the Basel Committee on Banking Supervision (BCBS), the Committee for Payments and Market Infrastructures (CPMI), the Ecumenical Organization of Securities Commissions (IOSCO), the Financial Action Task Force (FATF), the Organisation for Economic Co-operation and Progress (OECD) and the Financial Stability Board (FSB). Each covers different aspects of crypto asset risks within their separate mandates. The FSB elaborated:
Standard-setting bodies and other international organisations are working on a number of fronts, directly addressing publishes arising from crypto-assets. They are mainly focused on investor protection, market integrity, anti-money laundering, bank risks and financial stability monitoring.
The FSB is an international body that monitors and makes recommendations about the global financial plan. It has submitted several crypto-related reports to the G20 Finance Ministers and Central Bank Governors Meeting. The most recent one, termed “Decentralised financial technologies,” was published on June 6. It follows another which details standard-setting organizations’ regulatory overtures and work underway on crypto assets. The board has also submitted a report which lists all member countries’ crypto asset regulators to alleviate them collaborate on regulations.
Crypto Exchange Registry
Among crypto-related topics to be discussed, finance ministers and middle bankers from the G20 countries are expected to reach an agreement on creating a registry of crypto exchanges in an effort “to prevent accepted money laundering,” Nikkei Asian Review reported.
Japan is expected to lead the discussion, drawing from its own involvement of requiring all crypto exchange operators in the country to register with its top financial regulator, the Financial Services Agency. So far, 19 securities exchange operators have successfully registered. They have to comply with strict rules imposed after one of the largest crypto reciprocations in the country, Coincheck, was hacked in January last year. In September, a registered exchange, Zaif, was also hacked.
The tightened setting has discouraged a number of operators from registering; some voluntarily withdrew their applications while others were junked by the agency. Nonetheless, the regulator revealed to news.Bitcoin.com in March that over 140 more businesses had expressed benefit in registration.
Financial Stability
The FSB continually assesses financial stability risks from crypto assets and reports to the G20. In Strut last year, the board reported that crypto assets did not pose material risks to global financial resoluteness. In its report entitled “Crypto-assets: Work underway, regulatory approaches and potential gaps,” the board reaffirmed:
To date, the FSB resumes to assess that crypto-assets do not pose material risks to global financial stability at present, but that they do cheer up a number of further policy issues beyond financial stability.
The European Central Bank shares the sentiment. In its May detail, the bank stated that “At present, crypto-assets’ implications for and/or risks to the financial stability of the euro area, monetary way, and payments and market infrastructures are limited or manageable.”
Another FSB report will be released in September which will list developments in stablecoins and tokenization. According to the FSB, the OECD is also “currently undertaking analytical work on tokenisation of assets and the import a possible proliferation of such a mechanism would have on the financial markets, as well as around the benefits and risks of stablecoins.”
Advice on Virtual Currencies
The G20 countries have already reaffirmed their support for the FATF as the global standard-setting body in bailiwicks of combating money laundering and other related threats to the integrity of the international financial system. They have also concurred to follow the FATF recommendations including those concerning crypto assets.
The FATF has promised to release its new “Guidance on Effective Currencies” this month. A number of countries such as Japan, Russia and South Korea, have already established complying with the crypto standards created by the FATF, as news.Bitcoin.com reported.
Different Regulatory Approaches and Crevices
The FSB explains that regulatory gaps may arise when crypto assets are “outside the perimeter of market regulators and payment scheme oversight” and “from the absence of international standards or recommendations.” Noting as examples “issues around crypto-asset wallets as certain vehicles for storing crypto assets,” the board asserted that “The rapid technological evolution of crypto-asset markets may also motivate regulatory approaches and give rise to regulatory gaps or areas that require more regulatory focus,” totaling:
A forward-looking approach in monitoring crypto assets can help provide a basis for identifying potential gaps and areas that should be prioritised or met on.
The board, therefore, “recommends that the G20 keep the topic of regulatory approaches and potential gaps, including the question of whether diverse coordination is needed, under review.”
Banks Engaging in Crypto Activities
The BCBS is assessing and responding to the risk crypto assets pass for to the banking system. It has been monitoring crypto-related developments and is “developing high-level supervisory expectations for banks engaging in crypto-asset endeavours.” Currently, the Basel framework does not explicitly apply to banks with exposures to crypto assets but “it does set out nadir requirements for the capital and liquidity treatment of ‘other assets,’” the FSB clarifies:
The committee is now considering whether to formally make clear the prudential treatment of crypto-assets across the set of risk categories.
Central Bank Digital Currencies
A study on central bank digital currencies (CBDCs) has been transmitted by the CPMI whose work on crypto assets focuses on innovations in payments, clearing and settlement, and their impact on the modish standards for financial market infrastructures.
While most central banks are interested, the study has found that they “arrive to have identified the challenges of launching a CBDC, but are not yet convinced that the benefits (mainly of enhanced payments safety and experience) will outweigh the costs,” the FSB details:
The CPMI’s future work includes advising central banks to proceed with warn on CBDCs.
The committee will also continue to monitor “CBDCs and private digital tokens used for payments,” barter information and analysis with regulators and global policymakers, as well as explore “potential legal issues relating to digital currencies.”
Investment Hard cashes and Crypto Trading Platforms
The regulation of crypto trading platforms and investment funds with exposures to crypto assets are currently the spotlight of the IOSCO, the global standard setter for securities market regulation. A final report by the commission is expected by the end of the year. The FSB tell ofed:
IOSCO’s policy committee addressing enforcement issues has also created a portal through which its members can access and parcel information on enforcement and other issues relevant to crypto-assets and other digital threats.
The organization has also been target on initial coin offerings (ICOs). Having established an ICO Consultation Network for members to discuss their experiences and duties, it will also develop an ICO Support Framework to assist members in dealing with the regulatory risks from token sellings in their jurisdictions. Last week, the organization published a consultation paper entitled “Issues, risks and regulatory cogitations relating to crypto-asset trading platforms” and has requested feedback on key considerations by July 29.
What do you think of the G20’s progress in regulating crypto assets? Let us recognize in the comments section below.
Images courtesy of Shutterstock, Bloomberg, and the Japanese government.
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