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 US, and the European Union, is 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 enhancing consumer protections, as well as addressing potential risks to the 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, lack of governance of the crypto industry has led to such consequences as the bankruptcy and collapse of Silicon Valley Bank which used to deal with technology startups and Signature Bank which targeted crypto clients.
Some of the G7 nations already have proper crypto regulations. For example, in Japan, crypto assets are considered to be property under the Payment Services Act (PSA). It is mandatory for crypto exchanges to register and comply with the rules set in Anti Money Laundering/Combating the Financing of Terrorism (AML/CFT) law. When it comes to taxation, since 2017, earnings on cryptocurrencies are classified as “miscellaneous income,” and purchasers should be compensated accordingly. In June 2022, the country placed a ban on foreign stablecoins, allowing only those pegged against the Japanese yen or another legal tender.
Meanwhile, the European Union 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-assets issuers, and crypto-asset service providers (CASPs) under a regulatory framework for the first time. Once implemented, MiCA will apply to anyone providing crypto asset services or issuing crypto assets operating in the EU.
Global Efforts to Establish Crypto Regulatory 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. Besides, it described possible policy initiatives at the jurisdictional and international levels.
The International Monetary Fund (IMF) is also making efforts to enhance crypto regulation. The organization has even highlighted key elements for each country to consider in order to develop comprehensive and coordinated guidance following the fast spread of crypto. IMF directors have generally agreed that crypto assets should not be granted official currency or legal tender status. Besides, they believe that strict bans are not the best option, but targeted restrictions could take place, depending on domestic policy objectives. In the future, the Fund will work closely to support the regulatory work under the leadership and guidance of standard-setting bodies.