G20 countries goal to develop global framework against crypto-related risks

The G20, a group of 20 major economies, is working on a global framework to regulate cryptocurrencies and address the risks they pose to financial stability and tax compliance. The initiative comes amid growing adoption of crypto-assets for various purposes, such as investment, payment and speculation.

The G20 has asked the Financial Stability Board (FSB), a body of regulators, treasury officials and central bankers from the G20 countries, to propose “robust” global rules for cryptocurrencies by October 2022. The FSB has said that recent turmoil in crypto markets has highlighted their volatility, structural vulnerabilities and increasing links to the wider financial system.

The FSB has also said that stablecoins, a type of crypto-asset that is pegged to a fiat currency or a basket of assets, should be captured by robust regulation if they are to be used as a means of payment. Stablecoins have grown in popularity as they offer lower volatility and faster transactions than other cryptocurrencies.

The G20 has also requested the OECD, an intergovernmental organization of 38 countries, to develop a global tax transparency framework for crypto-assets. The OECD has delivered a Crypto-Asset Reporting Framework (CARF) that responds to this request and provides for the reporting and exchange of information with respect to crypto-assets between countries.

The CARF will target any digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions. It will oblige entities or individuals that provide services effectuating exchange transactions in crypto-assets for, or on behalf of customers, to report under the CARF.

The CARF will complement the existing Common Reporting Standard (CRS), which is a global standard for the automatic exchange of financial account information between countries. The CRS has been very successful in the fight against international tax evasion, but it does not comprehensively cover crypto-assets and related transactions.

The G20 countries hope that by developing a global framework for crypto-assets, they can enhance financial stability, consumer protection, market integrity and tax compliance. They also aim to foster innovation and competition in the crypto sector, while respecting national sovereignty and jurisdictional differences.

The G20 countries plan to finalize their policy consensus on crypto-assets by November 2023, when India’s G20 presidency will end. The policy consensus will then be implemented by each country according to their own legal frameworks and circumstances.

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