This week the G7 finance ministers discussed regulatory responses to emerging crypto and digital assets. The meeting included G7 central bank Governors and heads of the Financial Stability Board, the IMF, and World Bank. It was hosted by U.S. Treasury Secretary Steven T. Mnuchin and also covered COVID-19 measures.
Crypto and digital assets, particularly the announcement of Diem (formerly Libra), have had a significant impact on the global stage. Central banks have accelerated research around central bank digital currencies (CBDC). And regulators and governments around the world are hurrying to adopt appropriate regulations before its issuance.
As reported by Reuters, after the meeting, German Finance Minister Olaf Sholz said of Libra’s rebranding to Diem, “A wolf in sheep’s clothing is still a wolf. It is clear to me that Germany and Europe cannot and will not accept its entry into the market while the regulatory risks are not adequately addressed.” He added, “We must do everything possible to make sure the currency monopoly remains in the hands of the states.”
The G7 further discussed ways to prevent digital assets from being used for illegal purposes, reaffirming support for theG7 statement on digital payments made in October. This earlier statement recognized the positive potential of digital payments but warned that no global stablecoin should be issued before regulations are in place. But little else was revealed about the latest meeting.
The G7 has long warned against the risks of digital assets. In a Working Group Report on Stablecoins issued last year, they remarked that global stablecoins such as Diem represent a systemic risk. The risks highlighted include the impact stablecoins may have on a country’s ability to influence monetary policy, money-laundering, terrorism-financing, and open competition and anti-trust issues.
This latest G7 meeting comes soon after a U.S. bill targeted at regulating stablecoins was introduced last week. The STABLE Bill would amend current legislation and require stablecoin issuers to be regulated as banks. In the bill’s announcement, Congresswoman Tlaib specifically mentioned Facebook’s Diem and other proposed stablecoins by JP Morgan, Apple, and Paypal.
In October this year, the Financial Stability Board published two papers related to digital currency in preparation for G20 meetings. The first focused on global stablecoins and outlined a list of current, planned future legislation and a timetable. The second focused on cross-border payments, giving central banks a timetable to explore central bank digital currencies for cross-border purposes. Both the IMF and the World Bank are to be involved in this.