The finance ministers and central bank governors from the G-7 met in Germany last week to discuss global economic issues, including cryptocurrencies and central bank digital currencies (CBDCs).
The message in these two areas was clear, CBDCs have a potential role in future payment transactions, but cryptocurrencies, including stablecoins, should be subject to high regulatory standards.
The G-7, in a press release, praised the recent developments that central banks around the world have done on CBDCs and encouraged countries to explore their use in an international context. For the group, digital innovation in payments is key to achieving faster, cheaper, more transparent and more inclusive cross-border payment services.
“We encourage jurisdictions exploring CBDCs to examine the international dimensions of CBDCs, in particular their cross-border use. CBDCs with cross-border functionality may have the potential to spur innovation and open up new ways to meet users’ demand for more efficient international payments,” reads the press release.
There were no negative connotations associated with CBDCs in the statement. The only word of caution was a brief remark stating that international cooperation is important to minimize any negative spillover to the international monetary and financial system.
In contrast with this message, the tone for crypto assets was different, especially given the recent market turmoil due to the collapse of the stablecoin TerraUSD and the associated cryptocurrency Luna.
Read also: Push to Regulate Stablecoins Gains Momentum as TerraUSD Spirals
The G-7 urged the Financial Stability Board (FSB) to advance the development and implementation of “consistent and comprehensive regulation” of crypto assets issuers and service providers. The group also encouraged the FSB to work with international standard-setters to develop rules regarding “holding crypto assets, including stablecoins, to the same standards as the rest of the financial system.”
Finance ministers have already suggested two lines of action. First, the G-7 calls for the rapid implementation of the Financial Action Task Force (FATF) ‘travel rule’ with stronger disclosure and reporting requirements. This rule would oblige crypto exchanges to gather certain information (i.e., sender, recipient, amount, etc.) from crypto transactions and report them when requested. In the EU, where this rule is currently under parliamentary debate, the crypto community has raised concerns given the allegedly wide scope of the proposed law. EU lawmakers propose that crypto exchanges report every transaction, regardless of the amount. This would impose a significant burden on crypto exchanges, these companies argue.
Read More: EU Lawmakers to Vote on Tougher Crypto Transaction Requirements
The second recommendation issued by the G-7 is that “no global stablecoin project should begin operation until it adequately addresses relevant legal, regulatory and oversight requirements through appropriate design and by adhering to applicable standards.”
Both the EU and the U.S. are drafting legislation that includes new requirements for issuing stablecoins. In Europe, the proposed Markets in Crypto Assets Directive establishes significant requirements for stablecoins issuers that would like to release these digital assets in Europe. For instance, issuers should publish white papers, they should also register with the relevant authority and in some instances, they may be scrutinized by the European Banking Authority. In the U.S., Sen. Pat Toomey of Pennsylvania recently introduced a bill to regulate essential aspects of stablecoins.
In short, the finance ministers and central banks concluded that they “remain committed to high regulatory standards for global stablecoins, following the principle of same activity, same risk, same regulation.”
Read More: Senator Toomey Sounds Alarm for Stablecoin Regulation
Lagarde Also Voices Concerns
Speaking to the Dutch TV, Christine Lagarde, president of the European Central Bank, admitted she is skeptical about the value of crypto assets, as opposed to CBDC, in line with the remarks offered by the G-7.
“My very humble assessment is that [cryptocurrency] is worth nothing, it is based on nothing, there is no underlying asset to act as an anchor of safety,” said Lagarde in the interview.
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