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G20 Calls for Cryptocurrency Vigilance, Eyes October 2018 Deadline for Standardized AML Monitoring

The G20 says cryptocurrencies do not pose a threat to the global financial system. Notwithstanding, the G20 wishes to maintain a careful observance of the emerging market to preventing its use in illicit financial activities. Earlier in the month, the Financial Stability Board (FSB) had issued a press release saying the same thing.

G20 Agrees With FSB

The G20 member states declared their position as part of a communique issued on Sunday (July 22, 2018). According to the communique, the G20 believes that cryptos and their underlying technologies can significantly benefit diverse sectors of the global economy. Many experts believe that blockchain technology can be applied to solve problems in different areas of the global business process.

Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering, and terrorist financing. Crypto-assets lack key attributes of sovereign currencies. While crypto-assets do not at this point pose a global financial stability risk, we remain vigilant.

In a recent letter to the finance ministers and central bank governors of G20 member states, the FSB had given the same assessment. The FSB also announced that it was working in collaboration with the Committee on Payments and Market Infrastructures (CPMI). The two agencies aim to create a robust, standardized framework for monitoring cryptocurrencies. In the lead up to the G20 summit of March 2018, FSB chairman, Mark Carney told the G20 that Bitcoin and other cryptos didn’t pose any threat to global finance as well.

G20 Wants Standardized AML Monitoring for Cryptocurrency

Earlier in the year, Japan called on the G20 to look into the use of cryptocurrency in money laundering and terrorist financing. It appears the Group is now seriously making efforts towards establishing a standardized monitoring framework to combat the use of cryptos in illegal financial activities.

According to Sunday’s communique:

We [the G20] welcome updates provided by the FSB and the SSBs and look forward to their future work to monitor the potential risks of crypto-assets and to assess multilateral responses as needed. We reiterate our March commitments related to the implementation of the FATF standards, and we ask the FATF to clarify in October 2018 how its standards apply to crypto-assets.

Do you agree with the G20’s assessment of the emerging cryptocurrency market? Keep the conversation going in the comment section below.

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Carney On Eve of G20: Cryptos Don't Pose Risks to Financial Stability

An international group of central bank regulators and government ministers said Sunday that cryptocurrencies don’t pose a risk to global financial stability, comments that come on the eve of talks on the subject by the G-20.

In a letter published on March 18, Financial Stability Board chairman Mark Carney, who also leads the Bank of England, said that the organization doesn’t see the tech as a threat – at least at this juncture.

Carney wrote:

“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system.”

“Even at their recent peak, their (cryptocurrencies) combined global market value was less than 1% of global GDP,” he continued. “In comparison, just prior to the global financial crisis (in 2008), the notional value of credit default swaps was 100% of global GDP.

Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited.”

While the note is mostly in line with Carney’s previous comments on the limited impact of cryptocurrencies on the global financial system, the letter offers a window into where the discussions around this area may head to at the G20 meeting this week. As previously reported, government officials will meet Monday and Tuesday in part to talk cryptocurrencies, an agenda item that has been deemed “important” in a bid to reach a “common response” to regulation.

As acknowledged in Carney’s letter, a number of major countries – France, Japan and the U.S. among them – have called for a unified response to speculation around cryptocurrencies. Most recently, Japanese officials reportedly expressed interest in joint efforts around money laundering.

Indeed, some of those calling for action seem to share Carney’s assessment as well. As previously reported, U.S. Treasury Secretary Steve Mnuchin – who supports an international approach to regulation – has said in the past that he doesn’t view cryptocurrencies as a threat to financial stability.

Mark Carney image via Shutterstock

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UK Central Bank to Clamp Down on Crypto Money Laundering

The head of the U.K.’s central bank has said that the institution will step up its efforts to combat the use of cryptocurrencies in illegal financial activities.

According to a report by The Independent, Mark Carney, governor of Bank of England said he thinks more rigorous regulations should be applied to cryptocurrency exchanges in an effort to curb illicit use of cryptocurrencies in financial crimes, such as money laundering and terrorism financing.

“In my view, holding crypto-asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach,” Carney said during a speech at the Scottish Economics Conference in Edinburgh on Friday.

Further, the central bank chief said he doesn’t believe cryptocurrencies currently pose significant risks to the existing financial system. However, such risks may grow as retail adoption of bitcoin expands and traditional institutions lag behind on improvements to their systems.

Carney’s comment comes soon after a warning from the country’s top financial regulator on the risks of cryptocurrency investment.

As reported in December, Andrew Bailey, the chief of the Financial Conduct Authority, warned domestic investors that cryptocurrency assets like bitcoin are not regulated in the U.K. and, as such, any investment loss may not be protected.

Mark Carney image via CoinDesk’s archive.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Bank of England Chief: Bitcoin Isn't a Threat to Financial Stability

Bank of England (BoE) head Mark Carney said on Wednesday that bitcoin’s meteoric price gains do not pose a threat to global financial stability.

Talking to British lawmakers in Parliament, Carney said that bitcoin’s recent price moves are “significant” and more like an “equity-type risk,” Reuters reports.

He stated that:

“At present, we don’t view [bitcoin] as a financial stability issue.”

Bitcoin is the number one cryptocurrency by market valuation, and recently reached an all-time high of around $20,000. At press time, it was trading at just over $16,700.

Carney, who also acts as chair of the G20’s Financial Stability Board – a group of central banks and finance ministers that is also conducting its own blockchain research – further said that the idea of central bank-issued digital currency that can be used by the public has “some fundamental problems” unless there is a restriction in the amount that people can hold.

The BoE governor further noted, though, that he is “interested” in the distributed ledger technology (DLT) and that the central bank’s own FinTech accelerator shows DLT’s potential. According to a Bloomberg report, he added that the BoE is “active” in DLT, but is in no hurry to apply it to the core of the banking system, as any new technology has to satisfy a “five sigma quality rating.”

Carney has been commenting blockchain since the start of the year, when he said DLT has the potential to “fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks.”

The official’s statements come as global central banks are increasingly active in their work with blockchain and DLT.

The BoE has said that a forthcoming version of its real-time gross settlement (RTGS) system – which settles around £500 billion daily – will be compatible with distributed ledger technology. Meanwhile, monetary authorities in Canada, China and Russia, among others, have all expressed interest in a central bank-issued digital currency.

Mark Carney image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.