Financial Services Agency’s key man, whereabouts of global stable coin regulation ── different stances between G7 and G20 | CoinDesk JAPAN | CoinDesk Japan

World leaders are moving towards universal rules and standards following last year’s crash in the cryptocurrency market. It appears that consensus has largely been reached, but according to CoinDesk’s input from two senior officials involved in key discussions, developed and emerging markets are divided on how to treat stablecoins. .

The developed nations that make up the G7 seem to be more open to authorizing and regulating stablecoins that are pegged to the value of other assets such as fiat currencies. Emerging economies in the G20, meanwhile, are calling for stricter regulation or bans, fearing that widespread use of stablecoins poses a relatively greater threat to monetary policy.

Difference between G7 and G20

Disagreements between the two sides could stall acceptance of global standards for stablecoins, or at least fragment the unified oversight envisioned by financial regulators around the world, officials said. says. However, as the Financial Stability Board (FSB) has also pointed out, the FSB’s standards are designed to allow for some flexibility to evolve according to different country needs, he added.

“Personally, I do not believe that the introduction of cryptoassets and stablecoins will have a serious impact on the macroeconomy of the United States, the Eurozone, or Japan, nor will it affect monetary policy. The financial impact will be greater,” said Toshiyuki Miyoshi, deputy director-general of the Financial Services Agency’s Policy Bureau. The Financial Services Agency (FSA) is promoting efforts as the G7 presidency to formulate global crypto-asset regulations.

Developed countries have “no worries” about stablecoins, but “emerging countries have big concerns,” said a senior G20 official who spoke on condition of anonymity.

“Stablecoin regulation is a point of difference.”

In May 2022, after the collapse of stablecoin terraUSD and the disappearance of about $60 billion from the market, global regulators began to act, but some regulators continued to criticize the cryptocurrency market. Such a collapse, it said, had no direct impact on broader financial stability.

global standards

The G7 and G20 are leading the development of globally coordinated standards on crypto-assets. Japan and India currently hold the presidency of the G7 and G20, respectively (the G20 consists of the G7 plus 13 countries, including 10 emerging economies).

Although there are differences in specifics, both the G7 and G20 have been involved in this area by global standard-setting bodies such as the International Monetary Fund (IMF), the Financial Stability Board (FSB), and the Financial Action Task Force on Money Laundering (FATF). We are asking them to make relevant recommendations and establish rules.

The G7 and G20 have pledged to implement the FATF’s anti-money laundering rules on crypto assets, but recent statements have created differences in how they think about the treatment of stablecoins.

For example, the G7 has said it will follow FSB recommendations that focus on the wider financial stability impact of stablecoins. Meanwhile, the G20 appears to be considering following a somewhat nuanced joint document to be produced jointly by the IMF and FSB in September/October.

two approaches

The G7 and G20 show different levels of commitment to developing global crypto-asset policies.

The G7 has pledged to push for stricter standards and work to implement the FSB’s standards for regulating crypto-assets and the IMF’s recommendations on central bank digital currencies (CBDCs). The FSB’s individual recommendations regulating cryptoassets and stablecoins are scheduled for July 2023.

“The G7 strongly supports the FSB’s move to finalize two high-level recommendations, one on cryptocurrency trading and markets and the other on stablecoin regulation,” said Miyoshi, Deputy Director-General of the Financial Services Agency. said.

On the other hand, India took advantage of its position of being able to lead the discussions of the G20 as the chair country, and invited the IMF to participate and lead the discussions. This is because the FSB, the de facto leader in global cryptocurrency rulemaking, was believed to be coordinating with the United States.

India’s move may be due to concerns that entrusting the FSB to formulate critical monetary policy would lead to the exclusion of its old ally Russia, CoinDesk said, citing a policy consultant at India’s Ministry of Finance. ing.

Miyoshi said the FSB’s recommendations, which focus on financial stability and regulatory issues, “will certainly be finalized” in July. On the other hand, the IMF said, “We are trying to look at the situation surrounding crypto-assets not only from the perspective of financial stability, but also from the perspective of macro-financial implications.” , we may need more time for discussion,” he added.

The joint IMF-FSB document “will also focus on the impact of crypto-assets on monetary policy, capital flows, the international monetary system and tax revenue,” Miyoshi said.

Emerging market concerns

According to Miyoshi, emerging markets are concerned that the widespread adoption of stablecoins could affect the effectiveness of monetary policy. Monetary policy is the measures taken by central banks to control the supply of funds and achieve growth.

“For example, if a stablecoin pegged to the U.S. dollar is introduced and circulated in a very small emerging country, it could undermine the effectiveness of that country’s monetary policy and destabilize capital flows.” Deputy Director Miyoshi pointed out.

He added that the dollar and euro “are unlikely to be replaced by stablecoins” within G7 jurisdictions such as the United States, United Kingdom, Canada and Japan.

“However, there is a risk of currency substitution in developing countries where monetary policies and exchange rate regimes are not robust.”

Miyoshi and G20 officials also said that if stablecoins spread in emerging countries, it could affect the effectiveness of tax collection and revenue.

“The international community will do its best to reach an agreement on these matters,” Miyoshi said, suggesting the G7 could agree on a compromise.

“Concerns about stablecoins in the G20 economies may be alleviated by the FSB recommending comprehensive stablecoin regulation.”

But for certain emerging economies that may simply want to ban stablecoins altogether, I’m not sure that’s enough.

As of this writing, the FSB and IMF have not responded to requests for comment.

｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
｜Image: Shutterstock