France and Germany have called for collective action of cryptocurrencies to be top of the G20 agenda this year.
The finance ministers and central bank governors from the world’s 20 major economies will be meeting in Buenos Aires, Argentina, the current holder of the G20 presidency, in March.
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Representatives from France and Germany have written to the finance minister of Argentina to call for an international report on the implications of the digital currencies.
In addition, the ministers have requested an International Monetary Fund (IMF) report on the financial stability implications on currencies like bitcoin and ether. They added that the G20 should work towards “trans-boundary” action to regulate them.
What was said:
The French finance minister Bruno Le Maire and central bank governor Francois Villeroy de Galhau, teamed up with the German finance minister Peter Altmaier and central bank governor Jens Weidmann to send the letter.
“We believe there may be new opportunities arising from the tokens and the technologies behind them.
“However, tokens could pose substantial risks for investors and can be vulnerable to financial crime without appropriate measures. In the longer run, potential risks in the field of financial stability may emerge as well.”
Why it matters:
Regulators and government ministers are becoming increasingly agitated about the impact of cryptocurrencies like bitcoin.
This week, the European Central Bank (ECB) called for a global commitment to the crackdown on digital currencies. An executive board member at the bank, Yves Mersch, said the prospect of regulation has “moved higher up the agenda.”
However, the main issue with regulation at the moment is how it would actually work. The nature of the technology behind bitcoin, blockchain, is that transactions are anonymous so you can’t trace who is making the transaction. And, this is part of the enduring popularity behind the cryptocurrencies compared to fiat currency.
Though governments like in India and China may ban the use of cryptocurrencies or bitcoin mining, at the end of the day they’re still not really sure how to regulate them.
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It’ll be interesting to see how the G20’s finance ministers approach this in March.
Last year, bitcoin really hit the mainstream. In April, Saxo Bank released a report titled Outrageous Predictions for 2017, suggesting the price of bitcoin would hit “as high as $2,100”.
With the gift of hindsight, we now know that $2,100 was a measly prediction for the cryptocurrency. Bitcoin later hit nearly $20,000 at its December peak.
In addition to hitting new highs, cryptocurrencies also caused a surge in anxiety for governments across the world. Ministers are raising concerns over the illicit ways cryptocurrencies can be used. As well, minsters aren’t sure what to do with those tax-free benefits they offer.
Garrick Hileman, at the University of Cambridge, told Verdict that 2018 will be the year of cryptocurrency regulation.