G20 Leaders, Including Joe Biden: Crypto Needs To Be Subject to Robust Regulation

Last week, at the 17th G20 Heads of State and Government Summit, which was held November 15-16, 2022 in Bali, Indonesia, the world leaders present made a joint declaration that had some interesting things to say about the crypto-assets ecosystem.

In a joint declaration released by the White House on 16 November 2022, the G20 Bali leaders had this to say about crypto:

We welcome ongoing work by the FSB and international standard setters to ensure that the crypto-assets ecosystem, including so-called stablecoins, is closely monitored and subject to robust regulation, supervision, and oversight to mitigate potential risks to financial stability. We welcome the FSBs proposed approach for establishing a comprehensive international framework for the regulation of crypto-asset activities based on the principle of same activity, same risk, same regulation.

We welcome the FSB consultative report on the review of its high-level recommendations for the regulation, supervision and oversight of global stablecoin arrangements. We also welcome the FSB consultation report on promoting international consistency of regulatory and supervisory approaches to crypto-assets activities and markets. It is critical to build public awareness of risks, to strengthen regulatory outcomes and to support a level playing field, while harnessing the benefits of innovation.

We welcome the final guidance by the BIS CPMI and IOSCO which confirms that the Principles for Financial Market Infrastructures apply to systematically important stablecoin arrangements. We welcome the FSB consultative report on achieving greater convergence in cyber incidents reporting, and look forward to the final report. We welcome the results of the second phase of the Data Gaps Initiative (DGI-2) and will continue to work with partners in addressing the identified remaining challenges.

We welcome the workplan on the new Data Gaps Initiative (DGI) prepared by the IMF, FSB and the Inter-Agency Group on Economic and Financial Statistics (IAG) in collaboration with participating members. We ask the IMF, the FSB and the IAG to begin work on filling these data gaps and report back on progress in the second half of 2023, noting that the targets are ambitious and delivery will need to take into account national statistical capacities, priorities, and country circumstances as well as avoiding overlap and duplication at international level.

We welcome the progress of work on the review of the G20/OECD Principles of Corporate Governance, including the second report and the ongoing public consultation, and look forward to further updates on the review.

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U.S. Treasury SecretaryDr. Janet Yellenrecently spoke out on regulation of crypto markets in the wake of the recent collapse of crypto exchange FTX.

On 16 November 2022, the U.S. Treasury Secretaryreleasedthe following statement:

The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets.

Over the past year, through the Presidents Working Group on Financial Markets and in response to the Presidents Executive Order on Digital Assets, the Treasury Department worked with its regulatory partners to identify risks in crypto markets. Some of the risks we identified in these reports, including comingling of customer assets, lack of transparency, and conflicts of interest, were at the center of the crypto market stresses observed over the past week.

We have very strong investor and consumer protection laws for most of our financial products and markets that are designed to address these risks. Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services.

The federal government, including Congress, also needs to move quickly to fill the regulatory gaps the Biden Administration has identified. In terms of financial stability, spillovers from the events in crypto markets have been limited, but a recent report by the Financial Stability Oversight Council, which Treasury chairs, warned that further interconnections of the traditional financial system and crypto markets could raise broader financial stability concerns.

Going forward, its vital we do what is necessary to address these concerning risks and act to protect consumers and promote financial stability.