By CCN Markets: Global finance ministers and central bankers reconfirmed their multilateral support of crypto-industry regulations on the weekend in Japan. They were attending the G20 Finance Summit ahead of the Leaders’ Summit in late June.
There were no surprises for the crypto-currency markets in the Communique sent out by Japan’s Minister of Finance on Sunday. The 14-point document reflects the outcomes of the weekend discussions between Finance Ministers and central bankers.
The finance leaders put their support behind crypto-assets while remaining vigilant in monitoring the risks they pose. They also acknowledged that crypto-assets, and other technological innovations, could deliver significant benefits to the financial system and broader economy.
“While crypto-assets do not pose a threat to global financial stability at this point, we remain vigilant to risks, including those related to consumer and investor protection, anti-money laundering (AML) and countering the financing of terrorism (CFT).”
Regulators need to avoid overregulation
G20 leaders reconfirmed their commitment to a globally consistent regulatory environment. There is widespread recognition by regulators and crypto market participants alike that the industry will be best served by responsive regulation that safeguards participants. However, leaders will have to strike a difficult balance. Overregulation would stunt the growth and innovation necessary if the industry is to serve its communities.
In the Communique, the G20 finance ministers and central bank governors reiterated their commitment to the various initiatives underway. They support regulatory efforts that protect consumers and investors, support market integrity and clamp down on AML and CFT.
In May, CCN looked into the AML rules aimed at bitcoin exchanges, anticipating it to be an issue raised at the Summit given the increasing sophistication of cybercriminals.
Cyber regulatory resilience much needed as crimes rise
In the Communique, leaders did commit to continuing stepping up efforts to enhance cyber resilience, and welcomed progress on the Financial Service Board’s initiative “to identify effective practices for response to and recovery from cyber incidents.”
This is much needed. If left unchecked, rising cybercrimes will decimate the industry’s integrity. In its first-quarter report, Ciphertrace estimated that cryptocurrency thefts, scams, and fraud could amount to more than $1.2 billion. It added that this only represented visible losses and that the true number was likely much higher. It foresees:
“…a tsunami of tough new global anti-money laundering (AML) and counter-terror financing (CTF) regulations will roll over the crypto landscape in the coming year.”
G20 backs crypto initiatives already underway
Meanwhile, leaders committed to applying the recently amended Financial Action Task Force Standards. They welcomed the International Organization of Securities Commissions’ (IOSCO’s) work on crypto-asset trading platforms. They called on the Financial Services Board (FSB) to “monitor risks and consider work on additional multilateral responses as needed”.
Leaders welcomed the FSB’s directory of crypto-asset regulators. The FSB submitted the directory to G20 finance ministers and central bankers in April. Japan, which has experienced numerous money-laundering and hacking scandals, has taken the lead on plotting a global cryptocurrency exchange register.
Japan Leads G20 Nations’ Plot of a Global Cryptocurrency Exchange Register https://t.co/AHgjWVsvpr
— CCN Markets (@CCNMarkets) May 31, 2019
The G20’s consistent, multilateral regulatory approach is welcome. Crypto regulations currently vary from country to country. Japan and South Korea have adopted crypto-friendly regulatory approaches. In contrast, China, India, and Indonesia are resistant to opening the door to crypto players.