G20 Regulation Promises Rigidity For Cryptocurrencies

In a paper published this Monday (10), titled: G20 roadmap to improve cross-border paymentspoints out the Financial Stability Board (FSB) that “a lot has already been done” on cryptocurrencies, but much more remains to be done in terms of regulation.

As a highlight, the text points out that several banks already have exposure to cryptocurrencies. Next, note that the BIS does an excellent job of covering such activities.

“In particular, the need for an effective stabilization mechanism is emphasized.”

The keyword of the “G20 Roadmap” is therefore stability. After all, the FSB was founded in 2009, right after the US housing bubble burst, eventually triggering a global economic crisis.

More regulations for cryptocurrencies

With cryptocurrency adoption advancing, regulators had to accelerate their work during the 2021 rally. While the bear market has given them extra time, as reported by the Fed’s Jerome Powell, a global regulatory framework appears to be on the way.

In addition to unbacked cryptocurrencies, another point highlighted by the FSB is stablecoins. After all, many believe they can make more daily use than other more volatile cryptos like Bitcoin.

“The international regulatory community is closely monitoring developments in the stablecoin industry and identifying potential effects of this industry on broader financial markets.”

Therefore, while stablecoins can facilitate international transactions, countries with weak currencies run the risk of their economies, albeit informally, taking over assets backed by others, such as the dollar.

“As the stablecoin industry is rapidly evolving with the potential to make an impact on a global scale, there will be a lot of focus on risk management.” continues the G20 document. “The CPMI […] considers whether and how the use of well-designed and managed stablecoins could improve cross-border payments, address existing frictions, what opportunities and challenges this would present, and how it could affect the core functions of central banks.

So in addition to “stability”, regulators are also looking for a way to create global laws. After all, many companies in the industry today easily circumvent local laws by locating their headquarters in other jurisdictions.

G20 follows the arrival of CBDCs

Another point addressed in the G20 document is the advent of CBDCs, which serve as competition for cryptocurrencies. Today, however, the biggest concern is related to the interoperability of central bank digital currencies.

“The report further concludes that there is no single model for access and interoperability of CBDC systems.”

However, traditional cross-border payment systems, such as SWIFT, claim that they can already solve this point, promising that they can even link old systems to future ones.

Finally, we can expect governments to fight to maintain their sovereignty by not allowing the private sector to provide better solutions for the population in the economy. Now, just know if they will present good alternatives or just kill the competition with more bureaucracy.