The G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting on February 24-25 in Bengaluru, India, concluded with a strong commitment to regulations for the cryptocurrency sector.
The International Monetary Fund (IMF), Bank for International Settlements (BIS), and Financial Stability Board (FSB) have been tasked to come up with recommendations and a roadmap for regulating the cryptocurrency sector.
G20 Meeting of Financial Chiefs
“We look forward to the IMF-FSB Synthesis Paper, which will support a coordinated and comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets,” The G20 Chair’s Summary and Outcome Document said.
Besides the finance ministers and central bank governors, the event was attended by Kristalina Georgieva, Managing Director, IMF, Agustin Carstens, General Manager, BIS, and representatives of the Financial Stability Board (FSB).
Klaas Knot, Chairman of FSB, sent a letter to the G20 meeting in which he mentioned that the FSB was preparing recommendations for regulating cryptocurrency and decentralized finance.
“This year, the FSB will finalize its recommendations for the regulation, supervision, and oversight of crypto-assets and markets and its recommendations targeted at global stablecoin arrangements, which have characteristics that may make threats to financial stability more acute,” the letter said.
A seminar on Policy Perspectives: Debating the Road to Policy Consensus on Crypto Assets was also conducted on the sidelines of the two-day FMCBG event.
Ban and the Tough Talk
Giving a hint of the mood at the meeting, IMF chief Kristalina Georgieva said during a Bloomberg interview, “In that world of private issuances, there has to be more regulation… We are very much in favor of regulating the world of digital money.” And, it’s a top priority!
She clarified that stablecoins that are fully backed by reserves create a “reasonably good space for the economy.”
Cryptocurrencies that are not backed can’t be legal tenders. And, if they pose threat to financial stability, they can be banned, too. But regulations, predictability, and appropriate measures of consumer protection should be sufficient to ward off any risks to financial stability, she clarified.
Need and Call for Regulations
In a year, leading crypto firms like Terraform Labs and FTX collapsed due to a lack of regulation and oversight, resulting in billions of dollars of investors’ money lost. This has made governments and regulators seek greater regulation and monitoring rights over crypto businesses.
The just-concluded G20 meeting of financial chiefs has agreed to consider recommendations from the IMF and the FSB in its subsequent meetings. For the cryptocurrency sector, it augurs well that after the European Union’s MiCA Regulations, G20 is proceeding with regulation plans.