Late last year, when interest in Bitcoin and its price was at its peak, France’s finance minister suggested that there be a public debate of Bitcoin at the G20 summit which concluded this week.
The conclusion of this meeting, in regards to where the nations now stand on cryptocurrencies, is that a firm July deadline has been put forward for recommendations on how to regulate cryptocurrencies globally.
There was some general uptake and interest in approaching this hitherto unknown and confusing space as countries had, up until now been forging forward mostly on their own in terms of regulations.
However, as the conference kicked off, the buck was soon slowed as the Financial Stability Board (FSB) - which coordinates financial regulation for the Group of 20 Economies - resisted calls from some G20 members to discuss regulating cryptocurrencies at the conference.
Instead, many of the member states, but also a few notable exceptions, decided that cryptocurrencies needed to be examined further, and that more information was needed before any regulations could be proposed.
Therefore the first steps have been laid as July will see G20 nations bringing forward their data and information to begin recommendations on how to go about globally regulating cryptocurrencies.
Baby steps
The announcement came from Argentina Central Bank chair Federico Sturzenegger who said:
"In July we have to offer very concrete, very specific recommendations on not 'what do we regulate?' but 'what is the data we need?'”
This statement essentially indicates that there is at least agreement from some, not all, of the nations that they need to gather enough tangible data and information so that when they do sit down again in July, they can start discussing the next steps towards regulation.
At this stage, it is all very much baby steps, and purely a feeling out stage, but it is at least directional and shows that around the world, economic powers are taking the cryptocurrency market seriously.
However, as is so often the case with a bevy of varying nations with their own ideals, there are already countries going rogue from this first step.
Brazil Central Bank president Ilan Goldfajn said cryptocurrencies will not be regulated in his country, according to news service El Cronista. Furthermore, Goldfajn added that he will not necessarily be following the G20 recommendations.
Tangible protection
One thing that was pretty much wholly agreed upon by the G20 was that the Financial Action Task Force (FATF) - an intergovernmental body formed to fight money laundering and terrorist financing - would have its standards applied to the cryptocurrency markets in the respective countries.
"We commit to implement the FATF standards as they apply to crypto-assets, look forward to the FATF review of those standards, and call on the FATF to advance global implementation. We call on international standard-setting bodies (SSBs) to continue their monitoring of crypto-assets and their risks, according to their mandates, and assess multilateral responses as needed."
In the same draft statement, more insight was given as to how these financial powerhouses view cryptocurrencies. The overall view is that the G20 “acknowledge that technological innovation, including that underlying crypto-assets, has the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly”
However, the caveat is:
“Crypto assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing.”
Furthermore, the concerns for the G20 surrounding cryptocurrencies is that they believe that they “lack the key attributes of sovereign currencies. At some point they could have financial stability implications.”
Focus on old rules, not making new rules
There was hopes from the likes of France, and Germany that Bitcoin would be a strong topic of conversation at the G20 summit and that perhaps regulations could start to be formalised.
However, the FSB made a decision not to embark on this building of global cryptocurrency regulation at the conference because it intended to shore up a few of the existing economic rules, rather focusing in on existing regulations. FSB Chair Mark Carney said:
“As its work to fix the fault lines that caused the financial crisis draws to a close, the FSB is increasingly pivoting away from design of new policy initiatives towards dynamic implementation and rigorous evaluation of the effects of the agreed G20 reforms.”
Additionally, the FSB’s view of cryptocurrencies is that they “do not pose risks to global financial stability at this time.”
Bitcoin’s price reacted fairly well to the news that the financial superpowers of the globe would not be honing in on digital currencies yet, and managed to break out of a slump that saw it dip below $8,000 over the weekend.
It has further jumped to over $9,000 on the back of these positive talks held by the economic powers of the world on cryptocurrencies.
Where they will stand in July
It is important at this juncture of global summits to look deeper at where the G20 nations each stand when it comes to their own cryptocurrency regulation. In doing this, one can start to see how broadly split opinions are over the spectrum – from positive and embracing, to negative and banning.
Brazil has already said it will not necessarily be following the path laid down by the G20 when it does eventually come to designing a global regulatory framework, and no doubt, others will follow based on how they have gone about things so far.
Argentina
Argentina, despite being an important South American hub for cryptocurrencies, has never really flourished with interest in the digital currency wave sweeping the globe. The number of Bitcoin users in Argentina is still pretty small, in truth, and barely registers on statistics that track worldwide usage of the currency.
However, where Argentina has an edge in cryptocurrencies is the use of them for buying everyday tangible assets. They are also currently being used as a go-around for the onerous restrictions on importing foreign currency.
But the use of an unregulated currency to divert governmental policies screams of something that will be up for regulatory pressures in the near future, perhaps when it becomes more popular.
Australia
Australia is one of the few countries that has actively started building its own cryptocurrency regulations that suit it, without much outward glancing for hints or presidents. For example, the government recently addressed exchange regulations with a mandatory law.
The Australian government has implemented a law mandating Bitcoin exchanges operating in the country to register with the anti-money laundering agency Australian Transaction Reports and Analysis Centre (AUSTRAC).
The move is aimed at imposing restrictions on digital currencies, particularly Bitcoin, due to their continuous growth and adoption in the mainstream financial sector.
Brazil
Brazil and its government have seen a lot of potential in Blockchain and to that end have started upping their efforts into research and development of the new technology.
The Brazilian central bank Banco Central do Brasil is ramping up its research and development efforts on Blockchain technology. The central bank is reportedly experimenting with “just about every Blockchain platform it can get its hands on.”
Canada
Canada is another country that is in a similar boat to that of Australia as they have started the arduous journey of regulating, but in a positive and friendly manner. The Canadian government has given the go ahead to its first ever Blockchain-based Exchange Traded Fund.
Additionally, the Canadian Securities Exchange (CSE) announced that they will soon launch a securities clearing and settlement platform based on the Ethereum (ETH) Blockchain that lets companies raise capital with security tokens.
China
On the very other end of the scale is China, and more than enough has been spoken about when it comes to China’s view on Bitcoin. The People’s Republic has been hard nosed since it first instituted a nation wide ban on ICOs.
What followed was the banning of exchanges, effectively trying to cut off the citizens from using and trading in digital currencies, and, when that was ineffective, a massive firewall was raised to put the final nail in the Bitcoin coffin in the country.
France
As one of the nations looking to open up the dialog on cryptocurrency, France’s stance is clearly geared towards building a regulatory framework that can work globally for a currency that is used globally.
“I am going to propose to the next G20 president, Argentina, that at the G20 summit in April we have a discussion all together on the question of Bitcoin. There is evidently a risk of speculation. We need to consider and examine this and see how... with all the other G20 members we can regulate Bitcoin,” French Finance Minister Bruno Le Maire said.
Germany
Germany are also keen on opening up this dialog, having stated before the G20 suggestion was made, that the only way to control cryptocurrencies would be for international cooperation.
"Effective regulation of virtual currencies would therefore only be achievable through the greatest possible international cooperation, because the regulatory power of nation states is obviously limited,” Joachim Wuermeling, a member of the board of Germany's Bundesbank, suggested.
India
India, while not yet banning cryptocurrencies, is clearly not the biggest fan globally when it comes to their operating in the state’s borders.
Bitcoin exchanges are under fire in India, as many of the nation’s top banks have suspended or greatly curtailed functionality on exchange accounts. The State Bank of India (SBI), Axis Bank, HDFC Bank, ICICI Bank and Yes Bank have all taken strong action toward crypto exchanges, either closing accounts or severely limiting functionality.
Indonesia
Another country that is less impressed with Bitcoin than others, the Indonesian Central Bank has continued its campaign against digital currencies as it ordered a ban on the use of the leading virtual currency Bitcoin as a method of payment in October last year.
The bank claimed that Bitcoin represents neither a legal nor a recognized medium of exchange and payment in Indonesia.
Italy
Italy have recently come forward with a decree that aims to classify the use of cryptocurrencies in the country and to list “service providers related to digital currencies.” This is clearly a Bitcoin-friendly move, and one that services the booming Bitcoin businesses that are building around the digital currency.
Japan
Japan made headlines a few years back when it announced that Bitcoin was a legal currency, however, its loose approach to regulation has recently been curtailed as more and more issues have forced regulators to step in.
January’s hack of the Japanese-based crypto exchange Coincheck, with losses totalling more than $534 mln in NEM, the largest hack in the crypto world since Mt. Gox.
Now, Japanese exchanges are aiming to self-regulator to try and alleviate the pains for the government who have been put under pressure to protect their citizens.
Two trade groups in Japan’s cryptocurrency industry have agreed to form an as-of-yet unnamed organization next month that will self regulate the local crypto market in conjunction with Japan’s Financial Services Agency (FSA), it was reported.
Mexico
Mexico will soon be joining the likes of Canada and Australia as countries with active cryptocurrency regulations.
The central American nation is just one signature away from regulating cryptocurrency after a law setting out its position passed the lower house.
Combining new resolutions on fintech more generally, including crowdfunding and various aspects of cryptocurrency businesses, the bill now only requires a signature from President Enrique Peña Nieto before it becomes law.
Russia
Russia is another major country whose crypto regulatory stance has been well documented. The latest out of the socialist republic is that the government is looking to regulate and control digital currencies to the point of banning access to decentralized exchanges, and working on launching its own coin.
The Russian Association of Cryptocurrency and Blockchain (RACIB) has announced that the government’s long-discussed idea for a state-issued cryptocurrency, referred to as the CryptoRuble, will be launched in the middle of 2019.
Saudi Arabia
The Islamic Monarchy of Saudi Arabia has not had much dealings with cryptocurrencies that have made the mainstream media, but their general approach to such corruption and forms of money laundering are strict and no doubt Bitcoin would be viewed with suspicion.
Saudi Arabia arrested the richest Arab in the world, Prince Alwaleed bin Talal last year - a man hostile to Bitcoin - on corruption charges.
South Africa
As the epicentre of cryptocurrency in Africa, South Africa has approached the technology with interest and is looking to understand and analyse it before making any forms of stringent and harsh regulations.
The central bank has opened up a sand box for companies to operate in a regulatory safe space in order to assess the outcomes of Blockchain and cryptocurrency solutions.
South Korea
South Korea has also recently been in the news, for the wrong reasons, when it was announced that it would be banning cryptocurrencies in February after the Ministry of Justice independently announced its plans of banning cryptocurrency trading.
The Ministry did this without the consent of the Ministry of Strategy and Justice and other government agencies involved in the South Korean cryptocurrency regulation task force.
Turkey
Turkey, as well as Iran, have apparently been mulling over the idea of building their own cryptocurrency, much like G20 ally Russia, as well as Venezuela with its functioning Petro coin.
United Kingdom
The UK as not stepped fully into the ring of cryptocurrency regulation, but rather has been forthright with its warnings of the dangers that are persistent with cryptocurrency investing.
The Treasury Committee of the UK Parliament launched an inquiry into cryptocurrencies and their effect on UK investors and businesses in February.
The inquiry was prompted by the rising global interest in cryptocurrencies, as well as the ongoing rise and fall of the crypto market since the new year.
The USA
The US has had an ongoing regulatory process with Bitcoin as the Securities and Exchange Commission has stepping heavily when it comes to ICO monitoring, but the Commodities Futures Trading Commission (CFTC) has indicated that there is no reason to harm cryptocurrencies.
“Do no harm” was unquestionably the right approach to development of the Internet. Similarly, I believe that “do no harm” is the right overarching approach for distributed ledger technology,” J. Christopher Giancarlo, chairman and witness of the CFTC, expressed in front of the Senate this year.
The European Union
The EU, following along with Britain, who will soon be breaking away, has rather instituted warnings that imposed any set or stringent rules. In fact, the matter of regulating them has not really cropped up very high on the to-do-list.
The European Central Bank’s (ECB) Chair of the Supervisory Board Daniele Nouy said that although she had “no clue” whether new regulatory moves on crypto would come from Europe in the future, involvement of ECB-regulated banks in the sphere was “very, very low”.
“We scrutinize the issue in a regulatory perspective, we are ready to do something if it was needed, but so far it's not exactly very high on our to-do list.”
Wide range of opinions
It is clear that, even at a forum where these 20 nations can sit down and discuss a phenomenon like cryptocurrencies, there was never going to be a clear regulatory pathway cut out in a matter of days.
The first foot in the door has already been crushed by the FSB’s refusal to explore new regulations, but, even if it had opened the dialog, there would likely be a lot of disagreeing and slow progress. In any case, we will be awaiting any developments as and when they arise.