G-7 Urges Tighter Regulations of Cryptocurrency

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The Group of Seven major industrialized democracies are calling for stricter regulations of the cryptocurrency sector, with the goal of increasing business transparency and consumer protections, officials shared Sunday.

The G-7 is accelerating the conversation of related discussions, hoping to reach a decision before the meeting of finance ministers and central bankers in mid-May, which is just days prior to the G-7 summit in Hiroshima, Japan.

Symbol photo shows a coin bearing the logo of cryptocurrency Bitcoin and a graph showing price fluctuations. (Kyodo)

The members of the G-7 — Britain, Canada, France, Germany, Italy, the United States, and the European Union — are working towards a collective declaration on the issue, in light of the potential risks to the global financial system posed by crypto assets.

The plan came in response to the collapse of the major cryptocurrency exchange FTX in November, which revealed the lack of oversight in the industry and sent shockwaves through financial markets. Investors were also disconcerted by two sudden bank failures in the US this month: Silicon Valley Bank, which specialized in dealing with technology startups, and Signature Bank, which served crypto clients.

Japan and Canada are the only two countries of the G-7 that have cryptocurrency regulations, while the United States applies existing financial regulations. The G-7 is hoping to set the precedent for a global standard on the legal status of virtual assets and rules about them.

In October of last year, the Financial Stability Board, headquartered in Switzerland, released a set of recommendations for creating a regulatory framework which stated that crypto assets should also be subject to regulations for commercial bank activities. The FSB hopes to announce its final version of the framework in July this year.

The International Monetary Fund also put out a policy paper in February outlining key elements to be considered by each country in the development of comprehensive and coordinated rules following the spread of crypto. In the paper, IMF directors generally agreed that crypto assets should not be granted official currency or legal tender status.

The upcoming meeting of finance ministers and central bank governors from the Group of 20 major economies in Washington in mid-April is also likely to address issues associated with crypto assets, the officials said.

 

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