In a recent meeting which was held in the capital city of Argentina, Buenos Aires, from July 21 to July 22, 2018, G20, an international financial forum involving representatives of the world’s biggest economic spearheads, conveyed strong signals about placing strict regulatory actions on the cryptocurrency framework currently engulfing the world by October, later this year.
In this meeting, it was stated that cryptoassets across the world have no check boundaries on them as of yet, and hence, there is a strong need to put a regulatory net over the crypto space in this regard. It was stated:
Technological innovations, including those underlying cypto-assets, can deliver significant benefits to the financial system and the broader economy. Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing. Crypto-assets lack the key attributes of the sovereign currencies.
In the previous meeting, which was held in March 2018, it was stated that strong, hard and fast rules will be implemented regarding the global cryptocurrency framework and assets by July, 2018. But this meeting saw a further delay in providing a regulatory mechanism for handling all the crypto assets across the world. The Financial Stability Board (FSB), which is the central financial regulatory body for all the major 20 economies of G20, recommended to lay-off hands in deciding the rules and regulations for overseeing cryptocurrencies.
The Financial Minister and Central Bank Governors (FATF) group, a special group dedicated for providing recommendations for monitoring the crypto space, sees an absence of clear and vivid regulatory laws currently being implemented across the crypto space for monitoring the assets, but recommendations from FSB have taken things in a different direction.
The FSB’s initial assessment is that crypto assets do not pose risks to global financial stability at this time. FSB Chair Mark Carney
FATF has softened its stance regarding the rigid regulatory laws required to be implemented on the crypto-assets across the world in the months succeeding the previous gathering, as per the recommendations from the Financial Stability Board. However, another deadline of October, 2018, has been given to the FATF by the G20 in order to provide the necessary infrastructure recommendations needed for properly handling crypto assets. In the same meeting that took place in Buenos Aires, it was also stated:
We reiterate our March commitments related to the implementation of the FATF standards and we ask the FATF to clarify in October 2018, how its standards apply to the crypto-assets.
Since G20’s role is to provide financial stability and equality across the world, not being able to regulate crypto-space, one of the biggest economic game-changer in the modern world, poses many vulnerabilities and threats to the global financial ecosystem. Unlike the central regulatory systems that the world have seen over the past, the emergence of blockchain financial ecosystem has sent some strong warning signals to the global economy. It was stated in the same meeting that:
While crypto assets do not, at this point, pose a global financial stability risk, we remain vigilant.
The major reason behind the absense of regulatory laws is the lack of consensus regarding the cryptospace among the G20 economies. Many countries have their own regulatory laws regarding cryptocurrencies, and hence, their lies the problem of finding the common ground. One such instance is Germany, which has its own definition of cryptocurrency. Germany considers cryptocurrecy as a personal and private property, which should have no influence from the governmental side. European Union, also, has its own way of handling Initial Coin Offerings (ICOs), and does not imposes strict laws and regulations on it, while some states have different ways of imposing regulatory framework over them.
Looking at the angle and stance that G20 has taken regarding regulation of crypto-assets, it is implied that G20 is avoiding, at this moment, any hard and fast regulatory framework to be implemented upon the crypto-world. Since, cryptocurrencies have their own benefits and risks, it might be too early to put restrictions and laws on the crypto-world, and hence, more practical and pragmatic overview is first required to take this step.
Cryptocurrencies have laid their net over the entire world. The major role of all the financial regulatory bodies across the world is to streamline cash flow and provide financial equality. Tax-evasion, one of the major factors in sustaining crytocurrencies, remains a challenge for all the regulatory bodies across the world. Being able to get detached from a central system and to be able to stay connected through a distributed network, relieves one from certain service charges that the central system imposes on its user. Since tax has played a very critical role in providing financial stability and equilibrium in all the countries across the world, being able to evade it through blockchain system poses a serious challenge in shaping the global economy of the future. Distribution and flow of money is necessary for the sustaining any economic ecosystem and with global crypto assets staying out of the tax collection zone, the chances of financial instability may start to rise. Crypto world is not significant enough to overthrow global economy as of yet but a proper regulatory framework is needed just now, before things blow out of proportion.
G20, being the common financial forum for all the major governments and central bank governors from across the world, is responsible for providing global financial stability at an international level. Since cryptocurrencies are on a bloom and are playing a very significant role in shaping up global economy, it is the need of the hour to put rules and regulations over this pipeline just like any other currency, in order to cover all the aspects of the global financial stability. Although, as implied by the recommendations from the Financial Stability Board, the implementation and deployment of a well-established regulatory framework may still be out of sight.
All in all, although FATF may come up with regulatory recommendations by October as per stated, their implementation might still take a very long time owing to the lack of consensus that still remains to be attained among all the participating major economies of the G20, and also, due to the intentions that are implied by the FSB.