The G20 is an international forum that brings together the financial leaders of many of the world’s most prolific economies for the mutual pursuit of prosperity. Collectively, the organization strives to create policies that are beneficial for the world economy.
In March 2018, G20 leaders met in Buenos Aires for a summit that covered topics such as the increasingly prominent role of cryptocurrencies and digital assets in the world economy. At the time, the Financial Stability Board (FSB), an organization that monitors and coordinates global regulatory action, determined,
“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time.”
With that information, the G20 neglected to issue any regulatory actions at the meeting. Instead, G20 leaders promised meaningful regulatory action in July.
With the latest G20 meeting just days away, the FSB issued guidelines for monitoring and regulating crypto assets.
A Framework For Monitoring Crypto Assets
The FSB’s report, issued in conjunction with the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissions (IOSCO), and the Basel Committee on Banking Supervision (BCBS), maintains its contention that crypto assets do not pose a significant risk to global financial stability. However, because crypto markets are expanding so quickly, the organization is striving to monitor their proliferation, particularly the ways through which they could impact the traditional financial system.
As the report states,
“The objective of the framework is to identify any emerging financial stability concerns in a timely manner.”
Using a combination of public and private data, the FSB and accompanying organizations will monitor crypto markets for several critical factors including:
- Basic Market Statistics
- Confidence Effects
- Market Cap
- Institutional Exposure
- Payments and Settlements
- Volatility Comparators
In addition, the organization will monitor crypto markets for instances of fraud, and its potential impact on consumer confidence. The purpose of the FSP is to provide oversight guidelines for G20 nations, not to impose crypto regulation directly.
To be sure, outlining the framework is easier than effectively monitoring its idiosyncrasies. Citing a lack of global consensus on crypto governance and the inherent lack of transparency in crypto markets, the FSB acknowledge that its efforts would be challenging. The report recognizes,
“Given that the proposed monitoring metrics are mainly based on public data, it should be stressed that the quality of the underlying data can vary, and might not always be satisfactory.”
More Information to Come
There is considerable concern that cryptocurrencies can be used for money laundering. Last week, the U.S. indicted 12 Russian operatives for election meddling. Money laundering is one of the primary charges against the agents who used Bitcoin to finance their operation.
The FSB is preparing to issue a separate report on money laundering and the risk of terrorist organizations employing cryptocurrency to finance their operations.
These recommendations were sent to the G20 finance ministers and Central Bank Governors for their consideration. This week’s summit should provide a more comprehensive understanding of each participating country’s response to the guidelines and their plans for implementation.
Cover Photo by Richard Gatley on Unsplash