G7 Call for Rapid Crypto Regulation

by the Crystal compliance team

G7 finance ministers agree that greater transparency is required around reserve asset backing for stablecoins

G7 finance ministers are urging the monitoring and addressing of financial stability risks in the crypto-assets space. Having convened in Germany on May 19, 2022, the G7 ministers proposed implementing the Financial Action Task Force (FATF) Travel Rule, which calls for more firm regulatory reporting requirements for crypto transactions.

FSB Support For Crypto Asset Risk Monitoring 

The G7 has said it supports the Financial Stability Board’s (FSB) continued work to monitor and manage financial stability risks arising from all forms of crypto assets. It welcomes increasing global cooperation to address regulatory issues associated with using crypto-assets, including cross-border payments. 

After recent developments in the crypto-asset market, the G7 urges the FSB – in close coordination with global standard-setters – to promote the swift development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers, so as to hold crypto-assets, (including stablecoins) to the same standards as the rest of the financial system.

Global & Regional Regulatory Standards for Stablecoins

Following the collapse of cryptocurrency Terra (LUNA) and its stablecoin Terra USD (UST), the G7 called for legal, regulatory and oversight requirements prior to operating any global stablecoin project. The G7 reaffirms its commitment to high regulatory standards for global stablecoins, following the same activity, same risk, and regulation principle. What’s happening regionally right now when it comes to stablecoins?

US: A new bipartisan digital-assets bill that was introduced by the US Senate this week targets several areas in the crypto industry including stablecoins. The legislation was introduced on Tuesday by Wyoming’s Cynthia Lummis and New York’s Kirsten Gillibrand.

UK: As a response to Terra’s historic stablecoin collapse, the UK government published a consultation paper this week that outlines a strategy to reduce the risk for investors holding stablecoins. It was clarified that the central bank will step in during systemic collapses, which it defines as any “deficiencies in [a system’s] design or disruption to its operation may threaten the stability of the UK financial system.”

South Korea: Following the recent collapse of Terra, South Korea’s financial authorities have launched “emergency” inspections into domestic cryptocurrency exchange operators to enhance investor protection.

Japan: The Financial Services Agency  (FSA) of Japan stated at the beginning of June that it will establish regulations governing stablecoin issuers in the next months, to be up and running within the year.

India: The Reserve Bank of India (RBI) has issued a warning on crypto regulation following the events with Terra. The Indian government has consulted the IMF and the World Bank for recommendations.

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