World leaders are ready to converge once again at this year’s G20 Summit in Japan. This annual meeting of 20 member nations was formed to prevent financial crises while supporting a healthy global economy. During the last few Summits, cryptocurrencies were brought up as a sideline topic. But essentially, officials shelved discussions for two main reasons:
1 – They felt the cryptocurrency market was too small to have an effect on the world economy.
2 – Financial ministers and central bank representatives needed more information before hashing out an international framework for crypto regulations.
This year’s G20 will be different. It’ll be hosted in one of the hottest regions in crypto and blockchain tech. Not only that, Japanese leaders are encouraging the Summit attendees to formulate international regulations while enabling innovation in the space. They’re also giving member nations data and resources to help them understand the implications of blockchain while providing them with a guideline for regulation.
G20 is a group of twenty countries that make up an international consortium of central banks and governments from across the globe. The origins of G20 go back as far as 1999, directly following the 1997 Asian financial crisis. World leaders began sending their finance ministers and central bank officials to informal meetings to discuss global monetary concerns.
To make it official, George W. Bush hosted the first G20 Summit in Washington D.C. in 2008. The timing was not random; this first Summit took place right after the 2008 financial crisis.
Coincidentally, that’s about the same time that Satoshi Nakamoto published the Bitcoin white paper. And with it, he or she unleashed an incorruptible means of economy to the world. Satoshi, like the G20 members, was also trying to find a way forward out of the economic mess created by risky behavior involving hedge funds, derivatives, and risk-ridden mortgages.
As with Nakamoto, the main goal of the G20 Summit was originally to prevent financial crises across the globe. G20 Member nations began holding the Summits twice a year for the first few years, and since 2010, once every year. Other, non-member countries and international agencies will also attend and take part in the Summit.
The G20 Members are listed below, along with dates if they’ve hosted a G20 summit:
- Argentina – 2018
- Australia – 2014
- Canada – 2010*
- China – 2016
- Germany – 2017
- Japan – 2019
- Saudi Arabia
- South Africa
- South Korea – 2010*
- Turkey – 2015
- United Kingdom – 2009*
- United States – 2008, 2009*
*There were two G20 Summits in that year
What do G20 Summits address?
G20 Summits focus on many different world problems at once, from climate change, trade wars, and terrorism, to hedge funds, currency wars, and maritime disputes. During the last two Summits, in particular, cryptocurrency has reared its head as a topic in need of addressing.
However, many of the central banks and finance ministers involved have yet to recognize crypto as a vehicle of economic disruption. The market is too small, they say, it’s not a factor.
Japan’s exchange hacks and what they did about it
Some G20 members, such as Japan, have seen first hand the effects of unregulated virtual currencies. Japan-based crypto exchanges Mt. Gox and Coincheck both were victims of historic hacks, losing $473 million and $500 million respectively. In both instances, these cases of fraud led Japan to create new regulations.
But unlike other regions, Japan has been getting it done as far as crypto regulations. In fact, about a year after the Coincheck hack, the exchange up and running again with government licensure. Japan’s FSA (Financial Services Agency) required the exchange to improve their risk management and governance systems. Also, internal controls for protecting users had to be put in place. Now, nineteen other crypto exchanges are running legally in Japan with Coinbase also planning to operate in the South Asian crypto hub.
It may then be serendipitous that Osaka, Japan is hosting the G20 Summit for 2019. While many events will be going on surrounding the Summit (see finance ministry meetings below), the official dates are June 28-29. Prime Minister Shinzo Abe has vowed to bring cryptocurrency to the forefront.
Cryptocurrency to be in the limelight at G20 Summit 2019
The G20 Summit is not just a two-day event, but a series of discussions and meetings beginning May 11 with the Agricultural Ministries, and ending in November with the Foreign Ministers’ Meeting. One of the events during this period will focus on cryptocurrencies. In the Japanese city of Fukuoka, Finance Ministers and Central Bank Governors are meeting on June 8-9 2019.
The Meeting Agenda consists of two sessions:
Session I – Tax challenges arising from digitalization
Finance Ministers and Secretaries from China, France, Indonesia, Japan, United Kingdom and the US will be on the panel.
Session 2 – On-going efforts to counter tax avoidance and evasion
Representatives from the Organization for Economic Co-operation and Development (OECD) will be on the panel, as well as Treasury and Finance Ministers from Argentina, Australia, Germany, India, and South Africa.
As Japan assumes the G20 Presidency for 2019, the Summit will be the largest world conference in Japan to date. According to Prime Minister, Shinzō Abe, his country is dedicated to leading global economic policy to ensure growth, free trade, innovation and a reduction of disparities.
FSB Provided G20 Summit Attendees with Crypto Asset Report
While climate change, global health and infrastructure will be some of the main topics for the Summit meetings, cryptocurrencies are on the table this year as well. As such, the Financial Stability Board (FSB), an international economy watchdog, issued a Crypto-Asset Report to Finance and Central Bank officials prior to the G20 Summit.
Many countries and international bodies contributed to the report over the past year and they have identified the general areas they feel need attention:
- Building relationships between remittance providers and the banking system
- Identifying the risks of using, trading and speculating on virtual assets
- Filling in loopholes that lead to money laundering
- Identifying the risks of the crypto market to the world economy
To prepare Summit attendees, Prime Minister Shinzō Abe commissioned a guide outlining cryptocurrency governance. His support of a unifying approach to crypto regulation includes suggested proposals regarding:
- Protecting consumer assets
- Creating international security protocols
- Taking measures against hacks
- Educating potential customers about the risks
The report itself will be available at the Summit.
What Happened in Fukuoka
On Sunday, June 9, following a weekend of meetings in Fukuoka with G20 finance ministries and central banks, the G20 published a Communiqué outlining their goals moving forward. Number 14 of the Communiqué directly addressed crypto. Summit members here addressed the larger benefits of digital assets to the world economy. They also reconfirmed their vigilance to the risks posed to investors, while stating that the industry does not (yet) pose a risk to the global economy.
How will they maintain risk vigilance? In several ways that could potentially be extremely damaging to the crypto industry:
- They are committed to implementing full investor protection in the form of anti-money laundering regulations and countering the financing of terrorism (CFT). To do this, they want to enforce the same policies in place for banks, including monitoring suspicious activities such as quick movements of large amounts, withdrawals and deposits of over $10k, multiple accounts and also monitoring IP addresses that do not match account holder’s residence.
- G20 members also reaffirmed their allegiance to the Financial Action Task Force (FATF) Standards on virtual assets. This would include imposing 2-way KYC on all crypto transactions, basically obliterating the financial privacy that currencies like bitcoin provide. Anonymization protocols and services would also come under a red flag.
Also leading up to G20, two of Japan’s largest crypto platforms underwent a thorough review by the FSA: Huobi Japan and Fisco. The information gathered during these assessments will also be available to Ministers and Central Bank Governors.
The topic is now on the table, laying itself bare before the twenty leading economies of our time. They have more data than ever, and a renewed goal to work together on crypto regulations, as well as many other global topics.
The guidelines that the FATF and FSA provided, if implemented fully, would quite possibly cripple a new and thriving tech industry. According to G20’s Communiqué, in the global economy today, “growth remains low and risks remain tilted to the downside ”
Which leads us to 3 questions:
1. Can world leaders risk such a hit to a massive and fast-growing industry?
2. If they do choose to risk it, how will the dedicated, dynamic crypto industry react?
3. Will all G20 members be able to convince their homelands that crypto must be bankified and turned into a government controlled entity?
4. Last but not least, how long will these Draconian measures take before implementation. We’ve seen how slow regulations can be, most notably in the US. By the time these measures are in place, will new technologies be ready and waiting to circumvent?
5. Can all the G20 members really agree enough to be effective? For instance, Argentina is looking at how crypto can help advance it’s largely bankless population and help it move away from using USD. Countries like Japan, Australia and South Korea have very advanced ideas and vast experiences regarding the business of crypto. The US thus far has not shown leadership in the crypto market and they, along with others like Russia and India, are considering banning cryptocurrencies altogether.
As always, those of us in deep with crypto must await more unwelcome news from governmental bodies. Lucky for us, we also enjoy being part of a creative, intelligent community with technology’s top minds. We all share a firm commitment to improving upon the disaster that is the modern global economy.