G20 cryptocurrency regulation “a huge step in the right direction”
The G20 summit brought clear references to unified global cryptocurrency regulations.
On 30 November, at the G20 meeting in Buenos Aires, the G20 countries signed a joint declaration outlining their visions and objectives for the near future. The further growth of cryptocurrencies was among them, with the leaders declaring:
"We look forward to continued progress on achieving resilient non-bank financial intermediation. We will step up efforts to ensure that the potential benefits of technology in the financial sector can be realised while risks are mitigated. We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed."
The final version of the new cryptocurrency regulations are expected to be in place by 2020.
Formal recognition of the potential benefits of crypto-assets in a joint declaration from the G20 countries is kind of a big deal, and the cryptocurrency markets celebrated this unprecedented achievement by dropping a further 6% from the total crypto market cap.
It's also a major step towards unified global regulations, which have long been one of the key needs in the industry, and can pave the way for a much wider range of businesses to start seriously examining how to best utilise these technologies.
"This is a huge step in the right direction for the industry," said Brent Jaciow, head of blockchain affairs for the Utopia Music music data tracking platform. "Providing regulatory oversight and a framework for how to think about owning, investing, and the taxation of the asset class allows larger entities to seriously evaluate the space. Without the exact knowledge of the above, these entities would remain on the sidelines. Much like global capital markets, there is nothing large corporations fear more than uncertainty, especially as it relates to legal status and taxation."
"It is exciting to see that some of the most powerful countries in the world recognise not just the potential benefits of cryptocurrencies and new technologies, but also the importance of having international standards to regulate them," agrees Robertas Višinskis of Mysterium Network decentralised VPN network.
Work to be done
But the formal declaration is just the start, and hammering intent into sensible policies might be the hard part. This could be exacerbated by the widely varying attitudes towards cryptocurrencies among the G20 nations, Višinskis notes.
"China has tough regulation around cryptocurrencies, but welcomes investment in blockchain, whereas the UK is yet to release any laws or regulations surrounding cryptocurrencies," he observes. "In order for common standards to be established and universal regulation to work, the G20 member states are going to have to come to a compromise."
This might not be easy. Beyond the various internal events keeping some of the G20 governments busy, and potentially impeding lasting regulatory decisions in the near future, there are disparate goals to contend with. China broadly appears not to want its citizens to have public access to properly decentralised networks, while Russia has reportedly been enthusiastically utilising it to evade US sanctions which kind of flies in the face of intentions to implement effective FATF-standard regulations for it. Meanwhile, Japan has been happily embracing a world of self-regulated exchanges, a future of digital yen and a peculiar fondness for kitty memecoins.
General attitudes towards digital assets themselves are still worlds apart in different countries, and the thinking around fuzzier elements such as decentralisation and the actual role of alternative currencies might be even further apart.
It might help that the cryptocurrency markets are quite tiny though, Jaciow suggests. Its total market cap is now about US$127 million according to CoinMarketCap, or about 0.9 McDonalds, which might go a long way towards easing some of the financial stability concerns being raised around the technology.
"Cryptocurrencies do not pose a risk to financial stability," he said. "While the cryptocurrency markets are currently valued at $130bn, this is a small amount in comparison to global stock and bond markets which are valued in the trillions of dollars."
But its share of the market might grow in coming years, now that the G20 is exploring frameworks for more convincingly bringing cryptocurrency in line with traditional markets, and exploring some appropriate security theatre obligations for the industry.
"Overall, the G20 calling for the taxation of cryptocurrency is an important step in the widespread adoption of cryptocurrencies, and will continue to help the evolution of the market. Regulation will help to filter out bad players in the market, and build trust in blockchain and cryptocurrency projects," Višinskis said.
The biggest challenge might be yet to come though in the form of privacy coins, which allow the ability to directly and invisibly transact across the world without using third parties.
Different countries have so far been approaching this in their own way; Japan has banned privacy coins outright, some in the US have been pre-emptively decrying them, the EU seems to be approaching privacy coins with the same measured fatalism that it's approaching the entire industry with.
It will be curious to see how the G20 will collectively approach the inevitable collision between anonymous coins and the desire for financial control. That might be one of those areas it will "consider other responses as needed."