A Major Challenge Before G20 Leaders to Regulate Crypto
G20 leaders have agreed to continue monitoring and tackling emerging risks and vulnerabilities in the financial system where necessary. Through continued regulatory and supervisory cooperation, they also called for “a taxation system for cross-border electronic services” with a final version of regulations expected to be in place by 2020 which will be in line with Financial Action Task Force (FATF) standards. However, a major challenge the various G20 member states may grapple with could be the way such a regulation is harmonized since some of them have already started to regulate crypto assets.
According to their declaration after meeting in Argentina between Nov. 30 and Dec. 1 2018, they recognize that the global economy is growing though becoming increasingly “less synchronized between countries and some of the key risks, including financial vulnerabilities and geopolitical concerns, have partially materialized.”
“We look forward to continued progress on achieving resilient non-bank financial intermediation,” the declaration says. “We will step up efforts to ensure that the potential benefits of technology in the financial sector can be realized while risks are mitigated. We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed.”
Though industry insiders agree that the development of international standards to regulate new technologies like cryptocurrencies is necessary for the market to evolve, the founder of Mysterium Network, Robertas Višinskis, touched on the challenge of harmonisation.
“China has tough regulation around cryptocurrencies, but welcomes investment in blockchain, whereas the UK is yet to release any laws or regulations surrounding cryptocurrencies. In order for common standards to be established and universal regulation to work, the G20 member states are going to have to come to a compromise. For example, regulators around the world are still divided with regards to the tax treatment of tokens, so this may continue to be a challenge.”
For the Head of Blockchain Affairs at Utopia Music, Brent Jaciow, the proposed regulation is a step that will allow larger entities to seriously evaluate the space. He says: “Without the exact knowledge of the above, these entities would remain on the sidelines. Much like global capital markets, there is nothing large corporations fear more than uncertainty, especially as it relates to legal status and taxation.”
Take home from the G20 leaders declaration with regards to crypto-assets includes that with its current $130 bln market, cryptocurrencies do not pose a risk to global financial stability. It also shows that some of the most powerful countries in the world now recognize the potential benefits of cryptocurrencies and new technologies and the importance of having international standards to regulate them.