A Preview of Countries’ Crypto Regulatory Outlook Heading into the G20 Summit and What’s Next
The G-20 countries are gearing up for the upcoming G-20 summit, and the main aim of the upcoming event will be largely focused towards implementing unified crypto regulations set by intergovernmental organizations such as the Financial Action Task Force. The European central bank has confirmed that despite the challenges posed by crypto assets to the euro area’s financial stability, it is still manageable.
The G-20 nations have reaffirmed their support for the FATF recommended policies in areas such as anti-money laundering as well as crypto assets. The FATF recently conducted their annual Private Sector Consultative Forum in Austria which saw participation from over 300 representatives from the private sector.
The Financial Action Task Force (FATF) comprises of 36 countries and two international organizations including the European Commission. During the recent forum, FATF said,
“The discussions focused on the mapping of virtual asset services and business models … and on the implementation of specific FATF recommendations.”
The FATF in its April Report also put out a guideline for the member G20 countries for regulating and standardizing crypto assets. The Financial Action Task Force further promised
“to continue assisting jurisdictions and the private sector, in implementing a risk-based approach to regulating virtual asset service providers, including their supervision and monitoring,”
While providing a standard guideline to help the G20 nations in formalizing their crypto regulations, the FATF also emphasized on various risks that come along with the standardization of digital assets such as money laundering. The report states,
“Technological innovations, including those underlying virtual assets … may deliver significant benefits to the financial system and the broader economy.”
Russia Needs To Get Their Regulatory Framework Finalized
Russia, one of the G20 nations has been facing constant delays in finalizing the crypto regulations. Now they have come out to announce that they would be following the standards set by FATF to help them create a standard framework for the use of digital assets in the country.
The Russian President Vladimir Putin has asked the concerned authorities to finalize the regulatory framework in July last year, but there was no progress made on the order. Putin again ordered the authorities to complete the framework by July this year. Looking at the progress made on the recent order, the finalization of the framework might get delayed again.
Anatoly Aksakov, the Chairman of the State Duma Committee on Financial Market has recently said that they are facing issues due to the requirements set by the FATF. The chairman said that the guidelines set by the FATF either need to be implemented into the law on digital assets or a separate bill need to be passed. He explained,
“The law on digital financial assets has been suspended … There were FATF decisions that require us to resolve issues related to bitcoins and so on.”
Another report in the local media houses suggests that the laws on regulating crypto and digital asset may come in force in the Spring season. The reports were based on the deputy chairman of the Bank of Russia, Olga Skorobogatova's recent comments. The report quoted her saying,
“The law on digital financial assets, on crowdfunding, etc., all these bills are in a fairly high degree of readiness. Colleagues from the State Duma committees are very helpful, we expect that these laws can be passed during the Spring session.” She further stressed that these laws “are extremely important for the country and will provide an opportunity to implement new projects.”
Japan is Helping Other G20 Nations While South Korea Emphasises on Regulatory Consistency
The upcoming G20 summit will be hosted by Japan, which also happens to be one of the most crypto compliant nations with the consumer-friendly regulatory framework put in place. The country has also shown its interest in helping other nations with their regulatory dilemma by working on implementing global standards on crypto assets.
The House of Representatives recently passed a crypto bill with several resolutions. One of the media publications reported,
“We have fully grasped the regulatory trends of G20 countries and cooperated with each country to achieve international harmony.”
The Financial Services Agency (FSA), Japan's top financial regulatory released a report last December which states,
“To manage and mitigate the risks emerging from virtual assets, countries should ensure that virtual asset service providers are regulated for AML/CFT purposes.”
South Korea, another G20 nation has often echoed for the regulatory consistency and have announced several times that they would be complying with the unified crypto regulatory standards. Choi Jong-Ku, Chairman of the Financial Services Commission said that
“Transnational cooperation is necessary to regulate virtual currencies,”
The FSC chairman also emphasized on the importance of G20 nations adhering to the international standards prepared by the FATF
“to minimize regulatory inconsistencies.”
The Possible Challenges in Creating a Standard Regulatory Guideline
Chainalysis, one of the prominent blockchain and the crypto analytic firm gave feedback on the guidelines set by the FATF. The firm said that the Guidelines set by FATF would have profound implications for the cryptocurrency industry. The Chainalysis feedback report explained,
“There are clear technical obstacles that prevent cryptocurrency businesses from being able to comply with these standards. Cryptocurrencies were originally designed as a peer-to-peer financial system that has no central authority and no intermediaries.”
The analytics firm went on to note that in order to adhere to the FATF guidelines, crypto exchanges can use the transparency from the shared ledger to form an effective Risk-based approach. The firm went on to suggest that exchanges should take up the responsibility to conduct KYC and store the data safely. Crypto exchanges should start linking users KYC information with their transactions as it is not available on the public ledger.
The feedback report explained further,
“Forcing onerous investment and friction onto regulated businesses, who are critical allies to law enforcement, could reduce their prevalence, drive activity to decentralized and peer-to-peer exchanges, and lead to de-risking by financial institutions.”
Chainalysis noted that these measures would decrease the transparency which is currently available to the law enforcement agencies.