Crypto regulation has become one of the biggest topics of the talk amongst regulators and lawmakers across the globe and now this is also going to be reflected at the upcoming G7 summit.
The Group of Seven (G7) is a grouping of seven major industrialized democracies and advanced economies of the world, including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European Union.
This year, the 49th G7 summit is scheduled to take place in May 2023 and is planned to take place in Hiroshima, Japan. Japanese media reported that the G7 is planning to promote tougher regulations of the cryptocurrency sector.
According to anonymous officials familiar with the plan, the goal of the plan is to increase transparency and consumer protection. The move to increase regulation over the sector comes in response to the concerns about the potential threats to the global financial system posed by crypto assets.
In particular, the collapse of FTX, a major cryptocurrency exchange in November, revealed the fallacies in the governance of the industry and sent shocks through the larger financial markets.
Following all of these instances, the G7 is hoping to take the lead in formulating global standards for virtual assets. Japan, which is hosting the G7 this year already has cryptocurrency regulations, whereas the other members are seeking to state their collective efforts in a leaders’ declaration.
The officials say that the G7 will accelerate the pace of related discussions toward a meeting of finance ministers and central bankers in mid-May, just days before Japanese Prime Minister Fumio Kishida hosts this year’s summit in Hiroshima. While the legal status of virtual assets and rules about them vary by country, the G7 is seeking to establish global standards.
Global crypto regulations have been on the talks at various events and instances that have been organized in the past months or are scheduled to take place. Similar to G7, the G20 countries have also prioritized crypto regulations and have highlighted the need for having uniform global standards to ensure efficiency.
Last year, the Financial Stability Board (FSB) released recommendations for creating a regulatory framework for crypto assets, stating that they should also be subject to regulations for commercial bank activities. The FSB plans to announce its final version of the framework in July this year.
In February, Klass Knot, chairman of the Financial Stability Board (FSB), issued a letter to G20 finance ministers and central bank governors suggesting that many existing stablecoins would not meet the “high-level” recommendations soon to be established by global institutions like the FSB.
The International Monetary Fund (IMF) has also outlined key elements for each country to consider in the development of comprehensive and coordinated rules following the spread of crypto. Among other guidelines, IMF directors have generally agreed that crypto assets should not be granted official currency or legal tender status.
During an interview on the sidelines of the G20 finance ministers meetings in Bengaluru, IMF Managing Director Kristalina Georgieva emphasized that regulating crypto assets is a top priority for the IMF, saying, “We are very much in favor of regulating the world of digital money.” However, also warned that the option to ban cryptocurrencies should not be taken off the table, although good regulations, predictability, and consumer protection should be the first option.
As the digital asset market is expanding and evolving, regulators are coming under more and more pressure to ensure efficient regulation of the sector. While the regulators are considering carrying a strict approach, it is important to find a middle ground between investors’ protection and innovation.