G7 Summit Concludes with Emphasis on Crypto-Asset Regulation and CBDC

The recent meeting of finance ministers and central bank governors from the Group of Seven (G7) major countries held in Niigata, Japan, has concluded with the adoption of a joint statement outlining their collective stance on financial digitization and the regulation of crypto-assets.

The meeting, which took place from the 11th to the 13th of this month, served as a platform for discussing critical issues related to the global payment system and the role of Central Bank Digital Currencies (CBDCs) in shaping its future.

In the joint statement, the G7 representatives expressed their commitment to continuing policy deliberations to effectively address the challenges and opportunities posed by financial digitization. They stressed the significance of CBDCs in the global payment system and emphasized their intention to encourage international regulation and oversight of crypto-assets.

According to the statement, CBDCs could play a pivotal role in establishing a “trusted, stable, and transparent global payment system.” Referring to the “Public Policy Principles for Retail CBDCs” agreed upon in October 2021, the G7 reiterated that any CBDC should adhere to principles such as transparency, the rule of law, sound economic governance, cybersecurity, and data protection.

Furthermore, the G7 welcomed the ongoing work by the International Monetary Fund (IMF) in collaboration with relevant international organizations and national authorities to compile the “CBDC Handbook.” This handbook is expected to provide valuable guidance and insights into the development and implementation of CBDCs. The G7 expressed anticipation for the first set of deliverables from the handbook, which will be unveiled before their annual meeting.

The joint statement also highlighted the importance of effective monitoring, regulation, and oversight of crypto-assets. It acknowledged the financial stability and prudential risks associated with cryptocurrency activities and markets while emphasizing the need to support responsible innovation.

To this end, the G7 announced its commitment to implementing an effective regulatory and supervisory framework for crypto-asset activities and markets, aligning with the recommendations of the Financial Stability Board (FSB) that will be announced in July.

The G7 further encouraged the FSB and standard-setting bodies (SSBs) to promote the consistent and timely implementation of their recommendations on a global scale. It recognized the risks posed by decentralized finance (DeFi) and cryptocurrency intermediaries, showing support for the FSB and SSBs in their follow-up work on these areas.

The G7’s stance reflects a growing recognition among global financial leaders of the need for comprehensive regulation and oversight of crypto-assets. As the digital economy continues to evolve and gain prominence, policymakers are aiming to strike a balance between fostering innovation and ensuring financial stability.

The G7’s joint statement serves as a significant step toward establishing a common understanding and approach to CBDCs and crypto-asset regulation. It sets the stage for continued international collaboration and the development of robust frameworks that can address the challenges and harness the potential of digital finance in a responsible and secure manner.

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