The G7 calls for rapid and comprehensive regulation that meets the same standards as the traditional financial system. Finance ministers and central bank governors from the G7 met last week to discuss the global economic situation, including cryptocurrencies.
The committee was joined by the heads of the International Monetary Fund, the World Bank Group, the Organization for Economic Co-operation and Development and the Financial Stability Board, some of whom took an anti-crypto stance.
The report says the G7 is working alongside the FSB to “monitor and address financial stability risks arising from all forms of crypto-assets.He cites the recent downturn in cryptocurrency markets as a reason for:
“advance the rapid development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers, with a view to subjecting crypto-assets, including stablecoins, to the same standards as the rest of the financial system.”
No reference to the 20% drop in the Dow Jones is made in correlation with the drop in the cryptocurrency market. Interestingly, a dip in the crypto market means new regulation is needed so “fast“.
However, traditional markets are supposed to be efficient and sufficiently regulated. While proper regulation is probably needed within the fledgling crypto industry, it is also important to consider and embrace the nuances of blockchain protocols.
Traditional rules and regulations were designed for the physical world and may not apply to the complex nature of DeFi, GameFi and other digital financial assets. To say that the development of cryptocurrency regulation must be completed in a “swift” and “prompt” manner raises the question of whether this regulation will be thorough and innovation-friendly. Encouragingly, the report states that stablecoin regulation should:
“adequately meet relevant legal, regulatory and supervisory requirements through appropriate design and by adhering to applicable standards.”
It further states that “digital innovation in payments is a key driver of economic progress and development, including through faster, cheaper, more transparent and more inclusive cross-border payment services.”
However, the following section of the report does not focus on the broader crypto markets. Instead, she assesses the feasibility and implementation of central bank digital currencies, which she says must “be based on transparency.” He points out that the MNBCnot existing cryptocurrencies, could be the answer to cross-border payments and innovation.
“The MNBC with cross-border functionality can have the potential to drive innovation and open up new ways to meet user demand for more efficient international payments.”
Many potential solutions exist, including Bitcoin’s Lightning Network, Ethereum’s Layer 2 solutions, and many other Layer 1 blockchains that can manage, process, and settle international payments in seconds with minimal fees.
They are not subject to the same laws and jurisdictions as MNBC. The G7 believes that the control of the financial system must remain its responsibility. With global inflation above 6% and GDP falling month on month, some will wonder if it is not time to change and move towards decentralization.
*MNBC: central bank digital currency