G-7 and G-20 disagree on stablecoin regulation, worrying about emerging economies.
Leaders from around the world are working on creating universal regulations for the cryptocurrency sector. However, there is a divide between advanced and emerging economies when it comes to regulating stablecoins.
The Group of Seven (G-7), an international forum of seven advanced economies, is more open to regulating stablecoins. On the other hand, emerging economies represented in the wider G-20 grouping are calling for tougher restrictions or even prohibitions due to concerns about the potential impact on monetary policy and financial stability.
The G-20 is another forum for international economic cooperation made up of the G-7 jurisdictions, along with 13 other member countries, including 10 emerging economies.
These differences in approach threaten to fragment unified oversight and stall the acceptance of global norms for stablecoins. The G-7 and G-20 have committed to leading the establishment of globally coordinated norms for cryptocurrencies. Japan and India are currently the presiding countries of the G-7 and G-20, respectively.
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Both groups are relying on global standard-setters such as the International Monetary Fund (IMF), the Financial Stability Board (FSB), and the Financial Action Task Force (FATF) to make recommendations and rules for the cryptocurrency sector. However, recent statements have indicated differences in their views on the regulation of stablecoins.
The G-7 has said that its nations will align with the FSB’s recommendations for stablecoins, which are focused on the impact of stablecoin use on wider financial stability. In comparison, the G-20 is looking to align with a more nuanced synthesis paper jointly produced by the IMF and the FSB.
The G-7 has pushed for tighter norms and signaled its commitment to implementing the FSB’s individual recommendations for regulating crypto and stablecoins, which are expected in July 2023, and the IMF’s recommendations on central bank digital currencies (CBDCs).
Emerging economies are concerned about stablecoins because of their potential impact on the effectiveness of monetary policy if widely used. The increasing adoption of stablecoins could also impact the effectiveness of their tax collection and revenue.
Although disagreements between advanced and emerging economies could potentially stall the acceptance of global norms for stablecoins, the FSB has pointed out that its standards allow countries some flexibility in implementing the rules according to their specific needs.