G20 Adopts FSB Recommendation on Cryptocurrencies, Cryptocurrency is Not a Threat to Global Financial System

The G20, yesterday, adopted the recommendation of the Financial Services Board (FSB) by declaring that cryptocurrency posed no threat to the stability of the global financial system. The G20 also reiterated the need for better monitoring of the market to prevent the use of virtual assets in financial crimes and sponsorship of terrorism.

G20 Adopts FSB Recommendation

The G20 issued a communique on Sunday, July 22, 2018, detailing among other things, its stance on cryptocurrency. According to the communique:

“Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering, and terrorist financing. Crypto-assets lack key attributes of sovereign currencies. While crypto-assets do not at this point pose a global financial stability risk, we remain vigilant.”

The comments in the communique echo those of the FSB which were contained in a letter to the finance ministers and central bank governors of G20 member states. Earlier in the year, FSB chair, Mark Carney had also told the G20 that cryptos didn’t pose any risk to the global financial framework.

G20 Wants Standardized Framework for Cryptocurrency AML Oversight

Despite the G20’s position, the group recognized the need for a more robust and standardized framework for cryptocurrency AML oversight. Japan, one of the member nations in the G20, called on the Group to look into the dangers posed by virtual currencies in the area of money laundering and terrorist financing.

To adequately satisfy the call for better monitoring of the emerging asset class, the G20 has passed the buck to the Financial Action Task Force (FATF). The job of the FATF will be to determine how cryptos should be regulated. Explaining the decision, a portion of the communique reads:

“We welcome updates provided by the FSB and the SSBs and look forward to their future work to monitor the potential risks of crypto-assets and to assess multilateral responses as needed. We reiterate our March commitments related to the implementation of the FATF standards, and we ask the FATF to clarify in October 2018 how its standards apply to crypto-assets.”

Crypto-Enabled Crime is on the Increase

According to the FATF, cryptocurrencies provide a viable means for criminals to perpetrate their illegal activities. The anonymity of crypto transactions makes the asset class a viable proposition for money launderers, drug traffickers, and tax evaders. According to the FATF:

“Virtual currencies/crypto-assets facilitate easy online access and global reach which make them attractive to move and store funds for money laundering and terrorist financing. The FATF is actively monitoring the risks associated with virtual currency/crypto-asset payment products and services… Besides small-scale drug trafficking and fraud, the link between virtual currencies/crypto-assets and other predicate crimes appears to be growing.”

The FATF now has a deadline of October 2018 to clarify the means by which it plans to monitor and regulate the cryptocurrency industry.

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