G7 nations to call for stricter oversight of cryptocurrency markets

The Group of Seven (G7) major industrialized democracies are reportedly planning to promote tougher regulations of the cryptocurrency sector during the 49th G7 summit which is scheduled for May 2023 and will take place in Hiroshima, Japan.

The goal of the plan is to increase transparency and consumer protections, according to anonymous officials with knowledge of the plan, Kyodo Newsreported on March 26.

This move comes in the wake of concerns about potential risks to the global financial system posed by crypto assets. The collapse of FTX, a major cryptocurrency exchange in November, exposed the poor governance of the industry and sent shockwaves through financial markets.

The G7 is hoping to take the lead in formulating global standards for virtual assets. Japan, which already has cryptocurrency regulations, and other members such as Britain, Canada, France, Germany, Italy, the United States, and the European Union are seeking to state their collective efforts in a leaders’ declaration.

Seeks to establish global standards

The officials say that the G7 will accelerate the pace of related discussions toward a meeting of finance ministers and central bankers in mid-May, just days before Japanese Prime Minister Fumio Kishida hosts this year’s summit in Hiroshima.

While the legal status of virtual assets and rules about them vary by country, the G7 is seeking to establish global standards.

The Financial Stability Board (FSB), headquartered in Switzerland, released recommendations in October last year for creating a regulatory framework, stating that crypto assets should also be subject to regulations for commercial bank activities. The FSB plans to announce its final version of the framework in July this year.

The International Monetary Fund (IMF) has also outlined key elements for each country to consider in the development of comprehensive and coordinated rules following the spread of crypto. Among other guidelines, IMF directors have generally agreed that crypto assets should not be granted official currency or legal tender status.

Issues associated with crypto assets are also likely to be on the agenda of the upcoming meeting of finance ministers and central bank governors from the Group of 20 (G20) major economies in Washington in mid-April, according to the officials who spoke on condition of anonymity.