G7 countries require stricter crypto regulations
The move follows the collapse of the FTX exchange back in November 2022, as well as the recent banking crisis.
The Group of Seven (G7) world’s advanced economies, including Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union, are reportedly working on tighter regulation of the crypto industry. According to those familiar with the matter, during the next G7 summit that will take place in May 2023 in Hiroshima, Japan, nations will come up with a strategy aimed at increasing crypto transparency and improving consumer protection, as well as addressing potential risks to global financial system.
The move follows the collapse of the FTX exchange back in November 2022, as well as the recent banking crisis. According to the G7, a lack of governance of the crypto industry has led to such consequences as the bankruptcy and collapse of Silicon Valley Bank, which used to handle technology startups, and Signature Bank, which targeted crypto customers.
Some of the G7 nations already have proper crypto regulations. For example, in Japan, cryptoassets are considered property under the Payment Services Act (PSA). It is mandatory for crypto exchanges to register and comply with the rules set out in the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Act. In terms of taxation, since 2017, earnings on cryptocurrencies are classified as “miscellaneous income” and buyers should be compensated accordingly. In June 2022, the country banned foreign stablecoins, allowing only those pegged to the Japanese yen or another legal tender.
Meanwhile, the EU is preparing to vote on the new EU Market in Crypto-assets Regulation (MiCA) in April. MiCA will establish proper guidance on crypto regulation, bringing crypto assets, crypto asset issuers and crypto asset service providers (CASPs) under one regulatory framework for the first time. Once implemented, MiCA will apply to anyone offering crypto-asset services or issuing crypto-assets operating in the EU.
Global effort to establish cryptoregulatory framework
Back in October 2022, the Financial Stability Board (FSB) published a set of recommendations on the international regulation of crypto-asset activities. The document covered the main issues and challenges in developing a comprehensive and consistent regulatory approach that includes all types of crypto-related transactions that potentially pose a risk to financial stability. Moreover, it described possible policy initiatives at the jurisdictional and international level.
The International Monetary Fund (IMF) is also making efforts to improve crypto regulation. The organization has even highlighted key elements for each country to consider in order to develop comprehensive and coordinated guidance following the rapid spread of crypto. IMF directors have generally agreed that crypto assets should not be given official currency or legal tender status. Moreover, they believe that strict bans are not the best option, but targeted restrictions can take place, depending on domestic political goals. In the future, the fund will work closely to support regulatory work under the management and guidance of standard-setting bodies.
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