During this years G20 meeting held in Argentina July 21-22, Finance Ministers and Central Bank Governors gave thoughts and tried to tackle the issue on cryptocurrency policies. There did seem to be a general consensus that cryptocurrencies and their underling technologies have the potential to improve the efficiency of financial systems according to reports.
They carry hi tech allure that shines even in the toughest
times. The underlying technology gets favorable reviews – even from the above
cited detractors – as it holds the potential to contribute to a drastic improvement of
payment systems (with significant expected payoffs in terms of financial inclusiveness
and economic efficiency).
Discussions seemed to unsurprisingly shift back to the illicit activity aspect of crypto-assets where money laundering, illicit transactions, tax base erosion or terrorism financing are listed as the major concerns. It is worth noting that numerous officials and state-issued reports have shown illicit activity completed with cryptocurrencies is still a minuscule amount when compared to traditional fiat currency.
The UK National Crime Agency (NCA) reported the risk of digital currency use for money laundering to be relatively low in comparison to fiat.
Hong Kong’s Financial Services and Treasury(FSTB) have said that cryptocurrency is not a threat and is left out of organized crime.
Quebec’s Government have also said that Bitcoin’s usage for illicit activity has been declining over the years.
G20 Officials Proposal for Cyptocurrencies Moving Forward
More clear and concise regulations for crypto-assets seems to be the solution G20 officials are seeking. G20 are considering opening a specific crypto-assets chapter where cryptocurrencies and their potential impact on financial stability should be monitored regularly with a short-term and long-term perspective.
That task must be started sooner than later and should not wait for
CA to reach systemic importance. Current risks borne by users and investors – and
their rapidly increasing trend – deserve thorough examination. We believe that from
such analysis, recommendations and directives could emerge at time to influence a
more useful development path for CA – and competing technologies – and diminish
potential social waste and eventual collateral damage (on third parties, trust on the
payments systems, the environment, etcetera).
G20 officials have noted that crypto-asset regulation is still in an infant stage where many countries have no regulation, some have very liberal and friendly regulation (like Switzerland), and some have a more hostile stance, banning many crypto-related activities (like China). There has been a proposal that there needs to be an international consensus on how to handle crypto-assets so as to avoid regulatory arbitrage.
We recommend the design of a cross border framework to put CA on a level
regulatory playing field with other competing financial instruments and activities.
Assuring consistency and the building of a preemptive firewall for damage control
is a key purpose for putting such framework in place sooner than later. This is a
terrain for collaboration among the Financial Stability Board, the IMF, the Financial
Action Task Force on Money Laundering (FATF) and other Global Standard-Setting
After putting the new underlying technologies under the same regulatory umbrella,
let them develop and compete with other traditional or non- conventional platforms
on an equal footing as they provide the impetus to rethink the way finance is done.
It appears as if the G20 is looking to act on the recommendations which are to be provided by the FATF as early as October this year. While it may be difficult as opinions surrounding crypto-assets and regulations vary greatly between different nations, it does seem G20 as a whole are looking to quickly find a unified solution on how to deal with crypto-assets and their future in our current financial market.