Following the scheduled meeting of G20 members, there is some clarity on the most awaited global crypto regulation. While the global crypto regulation has been one of the topics discussed by several international agencies, G20 has been prioritising it above several other issues.
As India took over the presidency of G20 this year, the national authorities have brought up the importance of crypto regulation several times making it one of the prime topics in the ongoing discussions. In April, Indian Finance Minister Nirmala Sitharaman had proposed a common framework for G20 countries to regulate the sector.
According to local media reports, in the recent meeting of G20 Finance Ministers and Central Bank Governors (FMCBG), the authorities highlighted the macroeconomic risks and challenges associated with cryptocurrencies.
Speaking to media the internal sources revealed that the regulatory standards which is currently under discussion would give jurisdictions the choice to adopt tighter regulations. Notably, these tighter standards would be in addition to the established framework in light of these risks.
Sources reveal that this, in turn, could even result in a complete crypto ban. Reportedly, India which is currently hosting the summit, doesn’t want to be particularly lenient to cryptocurrencies and has also suggested a tighter approach. During the meeting, officials expressed worries about the collapse of cryptocurrency exchanges and their potential for being used for illegal activities.
The Reserve Bank of India has already voiced worries in the past about the negative implications of cryptocurrencies on the larger ecosystem. Last month, RBI Governor Shaktikanta Das, revealed plans for the development of a central bank network aimed at facilitating cross-border payments, promising faster, more seamless, and cost-effective transactions in the global landscape. His CBDC advocacy was accompanied by highlighting the potential threats cryptocurrencies pose to financial stability, leading him to advocate for their prohibition.
Simultaneously, amid the most awaited announcements on these regulation, the Financial Action Task Force (FATF) also stressed the importance of collective action in combating illegal crypto-related activities. Meanwhile, two reports were presented in the G20 July meeting as well. The reports were from the Financial Stability Board(FSB) and the Bank for International Settlements (BIS).
As reported by Todayq News, the FSB report provided recommendations but the agency claimed it did not fully address all risk categories related to crypto-assets. Highlighting the need of global regulatory standards, the FSB report stated that global regulations will make compliance necessary for crypto firms further safeguarding the industry.
Meanwhile, the BIS report pointed out inherent structural flaws in cryptocurrencies and their limited potential to benefit society. According to local media reports, a person with the knowledge of the matter stated:
Now most of them concur with RBI’s concerns related to financial and other risks associated with cryptos. The third G20 FMCBG meeting did discuss this matter in great detail.
Notably, the Indian government beliefs resonates with what was highlighted by the FSB that international cooperation is required to prevent regulatory arbitrage. They also emphasized the global need for anti-money laundering and terrorist financing norms.
Simultaneously, the G20’s recent step follow up on the letter written by Klass Knot, chairman of the FSB, to G20 finance ministers and central bank governors. In their work plan for 2023, the FSB finalized its recommendations for regulating crypto and stablecoins by July.
Meanwhile, the Financial Stability Board (FSB) and the International Monetary Fund (IMF) are evaluating aspects of cryptocurrency regulation and financial stability. The pair intends to present a “synthesis paper” later this year. Overall, it is clear that most agencies are advocating for a common regulatory structure for crypto assets to ensure efficiency.