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FameEX Hot Topics | G7 Countries Urge for Tighter Regulations on Digital Currencies

2023-03-31 15:52:40

The G7 nations are renewing their efforts to regulate digital currencies following several large-scale collapses in the sector. The United States has been hit particularly hard due to the sudden bank failures of Silicon Valley Bank (SVB) and Signature Bank, both of which had numerous digital asset service providers as customers. France, Germany, and Italy also experienced significant losses due to the unexpected collapse of FTX. In February, the Japanese branch of FTX announced that customers could start withdrawing their funds, stating that these funds would not be involved in the U.S. bankruptcy proceedings.

Among the G7 nations, only Japan has a well-defined legal framework for digital currencies, which has led to plans allowing domestic investors to trade foreign stablecoins on local exchanges. Meanwhile, the U.S. and Canada have tried to apply existing banking and securities regulations to the digital currency industry, but with mixed results. The International Monetary Fund (IMF) is now supporting G7 countries in their pursuit of a comprehensive legal framework for digital currencies. In previous statements, the IMF has cautioned countries against granting digital currencies the status of legal tender and warned about the risks of cryptoization in local economies.

Additionally, the Financial Stability Board (FSB) has issued recommendations urging regulators to treat digital currencies like banks and other financial institutions. As the European Union's Markets in Crypto Assets (MiCA) law approaches implementation, France, Italy, and Germany will soon have a legal framework to regulate this asset class. G20 nations are also rapidly moving towards digital currency regulations, with India leading the charge. As the president of the G20 nations, India has made it clear that it will use its influence to advocate for digital currency regulations with a global perspective to prevent regulatory arbitrage.

India's Finance Minister Nirmala Sitharaman stated, "We are talking to all nations, that if it requires regulation, then one country alone cannot do anything." She added, "We are talking with all nations if we can make some standard operating procedures which everyone follows to make a regulatory framework, and if it can be effective." In conclusion, G7 and G20 nations are increasingly recognizing the need for a cohesive and comprehensive regulatory approach to digital currencies. By collaborating and learning from each other's experiences, these countries aim to develop a robust legal framework that addresses the challenges and risks associated with digital assets while promoting innovation and growth in the sector.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

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