At the conclusion of the G20 summit in Argentina, finance ministers and heads of the central banks of the G20 countries called for a strict and continued monitoring of cryptocurrencies by July 2018.
The G20 was formed in 1999 as an international forum for governments and central bank governors from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Republic of Korea, the Russian Federation, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
The G20 Summit, comprising of the G20 finance ministers and central bank governors, was created as a platform to discuss and implement their decisions. The summits were organized as a response to the financial crisis of 2007–2010 as well as to recognize the fact that key emerging countries were not being included in core global economic discussions and governance practices.
A cryptocurrency is a digital asset intended to work as a medium of exchange that uses cryptography to secure its transactions, to manage the creation of additional units, and to authenticate the transfer of assets. Cryptocurrencies are a form of digital currencies, alternative currencies, and virtual currencies. As opposed to centralized electronic money and central banking systems, cryptocurrencies use decentralized control. The decentralized control of cryptocurrency happens through a blockchain, which is a public transaction database, operating as a distributed ledger.
The first decentralized cryptocurrency was the Bitcoin, which was created in 2009. Since then, many other cryptocurrencies have been introduced.
The summit, which took place in Argentina, saw representatives from around the world discussing significant concerns and challenges facing the global economy. It emphasized on the need to come up with innovative economic reforms, foreign policies, and sustainable growth to reverse the ongoing financial crises.
Following a number of discussions on blockchain and cryptocurrency, the leaders agreed that assets such as the Bitcoin raised “issues with consumer and investor protections, market integrity, money laundering and terrorist financing.” The discussions covered topics on how the blockchain technology may threaten the current economic system, although it received support from many policymakers.
It was clear that most of the economic leaders were in favor of cryptocurrencies, indicating that certain changes need to be made for the digital era. However, the summit was concluded with an appeal for a new directive, which intends to maintain crypto-assets and blockchain standards.
Argentina’s Central Bank Chief Frederico Sturzenegger noted that cryptocurrencies need to be examined, after which a press release by the communiqué of the First Meeting of Finance Ministers and Presidents of Central Banks of the G20 stated these assets have the “potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly.”
Additionally, the press release stated that these assets also raise important issues as they lack “key attributes” of sovereign currencies. The leaders also called upon “international standard-setting bodies (SSBs) to continue their monitoring of crypto-assets,” including assessing the risks of such assets. However, not all countries reached an agreement on the regulation of crypto-assets.
A statement summarizing the thoughts discussed at the summit is expected to be released in line with a recommendation by Mark Carney, the chair of the Financial Stability Board, who called for “further international coordination” and “enhanced monitoring,” reflecting division among regulators. Countries, such as France, suggested taking specific steps, such as introducing the legal status of “crypto assets service providers” as a first step for regulating the sector. However, others rejected the notion that such currencies should be treated as financial assets and worry that regulating them would give them a degree of legitimacy.
Our assessment is that the demand for an international regulation on cryptocurrencies will be met with some amount of skepticism from global traders. Although crypto-assets do not pose risks to global financial stability at present, we believe that it could change if the currencies make way into the core markets and systemic infrastructure of the world’s financial systems. Additionally, such crypto-assets can serve to money laundering or finance terrorism and cause harm to consumers who buy them. Nevertheless, no action by the G20 leaders is expected to follow as policymakers are yet to agree on a common strategy to tackle the issue and some countries, including the United States, are cautious of new regulation after the financial crisis of 2008-2009.