G20 Agrees to Regulate Crypto, But is This Good or Bad for the Market?

The G20, an international forum for the governments and central bank governors from the world’s 20 largest economies, has decided to regulate the crypto sector.

A declaration released by the forum read:

“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed.”

What Impact Could it Have?

Over-regulation restricts the growth of emerging asset classes and technologies by limiting the way companies can grow over the long-run.

For many years, the G20 has maintained an open-minded stance towards cryptocurrency regulation, possibly due to the encouragement of Japan, the second largest cryptocurrency market behind the U.S., to regulate the space and provide a healthy ecosystem for both startups and established companies.

Regulators can facilitate the growth of cryptocurrency companies, especially exchanges that require fiat on-ramps, by providing seamless access to legacy systems and banking services.

The government of South Korea, for example, recently permitted banks to work with cryptocurrency exchanges and provided a green light for financial institutions to offer virtual bank accounts to digital asset trading platforms.

Most countries within the G20 have already regulated their respective cryptocurrency sectors. An effort to regulate the international cryptocurrency market could encourage countries like Russia, Argentina, and India that are still yet to establish clear regulatory frameworks around the asset class.

The G20 said that it intends to help crypto create an open and resilient financial system and emphasized that it is “crucial to support sustainable growth.”

While over-regulation can hurt businesses in an early phase of growth, if countries within the G20 ensure that the policies they implement will not negatively affect the growth of cryptocurrency-related businesses to a significant extent, then the G20’s decision to regulate the global market could help eliminate the barrier between crypto and the traditional finance sector.

“We will continue to monitor and, if necessary, tackle emerging risks and vulnerabilities in the financial system; and, through continued regulatory and supervisory cooperation, address fragmentation. We look forward to continued progress on achieving resilient non-bank financial intermediation.”

More regulatory clarity could also speed up the process of major financial institutions like Morgan Stanley, Goldman Sachs, and State Street in establishing cryptocurrency ventures, which are currently waiting for regulators to operate as trusted custodians.

Public Investment Vehicles

Last week, the U.S. Securities and Exchange Commission (SEC) chairman Jay Clayton stated that Bitcoin markets are generally unregulated and vulnerable to manipulation.

Chairman Jay Clayton said:

“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation. It’s an issue that needs to be addressed before I would be comfortable.”

A gradual process of regulating the global cryptocurrency market may lead exchanges to become increasingly compliant with regional regulations, opening up the possibility of public investment vehicles like an exchange-traded fund (ETF) to be launched on top of the public cryptocurrency exchange market.

Read the full G20 declaration below:

Buenos Aires Leaders Declaration by CCN on Scribd

Author: Joseph Young
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Crypto Faces Global AML Regulations by June 2019, Says Watchdog

The international watchdog focused on anti-money laundering (AML) regulations has said it plans to institute a global framework for cryptocurrency beginning in June next year.

As Reuters reports, the Paris-based Financial Action Task Force (FATF) has taken a significant step forward in the process of regulating the famously unregulated market of digital currencies with its announcement this week.

FATF detailed plans to begin publishing rules that would set a standard for all cryptocurrency transactions, noting that global jurisdictions would be required to enforce certain licensing schemes or compliance checks on exchanges, financial service providers for initial coin offerings (ICO), and potentially digital currency wallet providers.

Marshall Billingslea, FATF’s president, was responsible for setting the early summer date for action next year following discussions this week between officials from 204 global jurisdictions.

The upcoming regulations come with a warning: any non-compliant countries will be put on FATF’s blacklist, meaning they will suffer from restricted access to the global financial system.

A statement released by the watchdog on Friday reads: “there is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism.”

A lack of global cooperation on cryptocurrency regulations until now has led to entirely different approaches being adopted by national governments, bringing uncertainty to crypto firms looking to expand their operations.

Countries have failed to agree on how best to manage the price volatility of the cryptocurrency market, and have been skeptical of wallets’ and exchanges’ inability to protect peoples’ investments on their platforms from hacks and ensuing theft.

During the G20 Summit earlier this year, leaders expressed a desire to expand existing international AML onto the cryptocurrency industry.

Author: Amelia Trapp
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G20 Watchdog Releases Framework for ‘Vigilant’ Crypto Monitoring

The Financial Stability Board (FSB), an organization focused on analyzing and making recommendations to the G20 on global financial systems, has presented a framework for monitoring cryptocurrency assets.

It notably lists several metrics that the FSB will use to keep an eye on the developing crypto markets and “should help to identify and mitigate risks to consumer and investor protection, market integrity, and potentially to financial stability.”

The standardized framework was published along with a report on Monday and has been submitted to the G20 nations’ financial ministers and central bank governors.

According to the document, the FSB’s monitoring efforts will focus on crypto assets’ price volatility, the size and growth of initial coin offerings (ICOs), crypto’s wider use in payments and institutional exposure, as well as the market’s volatility when compared to gold, currencies and equities.

The FSB – which is led by Bank of England governor Mark Carney – will also periodically compile qualitative reports to gather intelligence for market confidence, the report says.

The organization further sets out the reasoning behind the framework, saying:

“While the FSB believes that crypto-assets do not pose a material risk to global financial stability at this time it recognizes the need for vigilant monitoring in light of the speed of market developments.”

The report indicated that, apart from the FSB, other international regulatory organizations too are stepping up their efforts in monitoring specific areas of the cryptocurrency industry.

For instance, International Organization of Securities Commissions, a global regulatory body made of securities watchdogs, is developing its own framework in an effort to help member countries better analyze the impacts of domestic and foreign ICOs on investors.

Meanwhile, the Basel Committee on Banking Supervision (BCBS) is gathering data on its member banks’ direct and indirect exposure to cryptocurrency in an effort to quantify the potential impact of the technology.

The FSB report comes as the result of the G20 meeting in March this year, at which there were calls for global regulation of cryptocurrencies. As previously reported by CoinDesk, member countries agreed at the time that initial recommendations were required over what data should be used to monitor the crypto space, and set July as a deadline.

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Author: Wolfie Zhao
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