(Kitco News) -
The international Group of Seven major industrialized democracies (G7) are currently working on a coordinated push for tougher regulations on cryptocurrencies ahead of the upcoming 49th G7 summit in Hiroshima, Japan this spring, Kyodo News reported on Sunday.
The report cited officials with knowledge of the plan who confirmed that central bankers and finance ministers representing Britain, Canada, France, Germany, Italy, Japan and the United States, as well as the European Union, “will accelerate the pace of related discussions” in preparation for their meeting in mid-May, just before Japanese Prime Minister Fumio Kishida hosts the countries’ leaders at the G7 summit on May 19-21.
The officials said that the goal is to prepare a joint declaration representing a shared position on crypto for the heads of state to deliver at the G7 summit. The statement would address the potential risks that digital assets could pose to the global financial system and would call for increased transparency of crypto firms and enhanced consumer protections.
The G7 summit provides the highest-profile stage for the largest and most developed democratic economies to frame a shared narrative about cryptocurrencies since the collapse of FTX, the second-largest crypto exchange, in November. The bankruptcy of FTX and the resulting contagion and further devaluation of the broader digital assets ecosystem have put pressure on many governments, and on G7 governments in particular, to crack down on crypto fraud, provide clear regulatory guidelines, or both.
The G7 may find common ground on crypto elusive, as member countries have taken very different approaches to the nascent asset class, and seen very different outcomes as a result.
The UK has focused its energies primarily on developing regulatory guidance, issuing a regulatory framework for crypto regulation in February which outlined the government’s choice of regulator to oversee the sector, as well as detailed direction on stablecoin classification, rules for ICOs, exchanges, custody, and other key regulations for digital assets.
The United States, which has yet to decide whether cryptos are securities, commodities, a combination of the two, or something else entirely, has seen its Securities and Exchange Commission lead a frontal assault on crypto exchanges, stablecoin issuers, and banks that support crypto firms.
The governments of Canada and Japan, which have already classified cryptocurrencies in their respective countries and placed them under the clear jurisdiction of their existing regulators, have been less impacted by the tumult in digital assets, and have been less reactive as a result. Even FTX was forced to maintain distinct and verifiable reserves for their Japanese unit, which insulated Japanese customers from losses, and the exchange was never licensed to operate in Canada.
The ongoing banking crisis, which has claimed major U.S. lenders Silicon Valley Bank and Signature Bank in recent weeks, will also be top-of-mind for G7 leaders, their finance ministers and their central bankers, and developments on that front could push crypto to the backburner by the time the summit is underway.
On the international front, the Switzerland-based Financial Stability Board released a set of recommendations in October which place crypto assets within the same regulatory framework as commercial banking activities, and they plan to release the final version of their framework in July.
The International Monetary Fund also released a policy paper in February outlining the key elements they believe should be considered by each country in the development of regulations governing digital assets.
As of 2020, G7 nations represent 10% of the world’s population but account for over 50% of global wealth at upwards of $200 trillion.
The officials added that crypto assets would likely be addressed at the mid-April meetings of G20 finance ministers and central bank governors in Washington as well.
