After a series of crashes and bankruptcies since May 2022, the need for regulation has been felt across the cryptocurrency space.
The G20 Finance Ministers and Central Bank Governors (FMCBG) meeting in Bengaluru, India, on Feb. 24-25 concluded with a strong commitment to regulation of the crypto industry.
The International Monetary Fund (IMF), Bank of International Settlements (BIS) and Financial Stability Board (FSB) are tasked with providing advice and a roadmap for regulating the sector.
G20 Chief Financial Officer Meeting
“We hope that the IMF-FSB outline supports a coordinated and comprehensive policy approach to cryptocurrencies by considering macroeconomic and regulatory perspectives, including the range of risks cryptocurrencies pose”, G20 Presidential Summary and Conclusions Paper explain.
In addition to finance ministers and central bank governors, IMF Managing Director Kristalina Georgieva, BIS Director-General Augustin Carstens and representatives of the Financial Stability Board (FSB) were also present this event.
FSB Chairman Klaas Knot mentioned in a letter to the G20 meeting that the FSB is preparing proposals to regulate cryptocurrencies and decentralized finance.
“This year, the FSB will finalize its recommendations for regulation, asset regulation, and crypto markets, as well as for a global stablecoin agreement that could pose a threat to crypto market stability. Financial regulation gets tougher”. letter explain.
During the 2-day FMCBG event, there was also a session on Policy Perspectives: Debate on the Consensus Path to Cryptocurrency Policy.
Bans and Difficult Discussions
IMF Managing Director Kristalina Georgieva hinted at the meeting in an interview with Bloomberg:
“In the private placement space, there needs to be more regulation… We are very supportive of regulating the digital currency space. And, it’s a top priority!”.
She clarified that a stablecoin fully backed by reserves would “create pretty good room for the economy.”
Unsupported cryptocurrencies cannot become legal tender. And, if they threaten financial stability, they can also be banned. However, appropriate regulation, predictability, and measures to protect users should be sufficient to avoid any risks to financial stability.
The need for regulation
Within a year, leading cryptocurrency companies such as Terraform Labs and FTX collapsed due to lack of regulation and oversight, costing investors billions of dollars in lost funds. This has led governments and regulators to monitor and regulate crypto businesses more closely.
The recently concluded G20 chief financial officer meeting agreed to consider the IMF and FSB recommendations at their next meeting. As for the digital currency space, the good news is that the G20 is working on a regulatory plan under the EU’s MiCA regulation.
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According to CryptoPotato