When the G7 – the largest economic nations, consisting of the USA, Germany, Great Britain, France, Italy, Canada, and Japan – met last week for the G7 summit in Garmisch-Partenkirchen, Bavaria, the summit meeting was mainly dominated by the Ukraine war. The G7 agreed on a unified response toward Moscow.In addition to the main issue of the Ukraine war, the G7 also negotiated the regulation of cryptocurrencies. Above all, the crash of the stablecoin Terra Luna, which happened a few months ago. Is crypto regulation good or bad?
How do the G7 plan to regulate cryptos?
In the run-up to the G7 summit at Schloss Elmau, the finance ministers of the G7 met in May to advance the regulation of digital currencies.
The regulations, which are to be enforced by the Federal Financial Supervisory Authority (BaFin), relate primarily to the DeFi (Decentralized Finance) sector. The supervisory authority should regulate the DeFi area, which now corresponds to a capitalization of billions. The main aim is to prevent processes such as the crash of the Luna stablecoin. However, the aim is also for BaFin not to stand in the way of technological innovations. First and foremost, BaFin should not inhibit the crypto sector through over-regulation, but rather supervise it.
Goals of Crypto Regulation
The G7 called on them to moderate turbulence in the markets and promote innovation. At the same time, crypto assets should not disrupt the international financial system. In order to make this possible, the legislation in all countries must be uniform, according to the head of the French central bank, Francois Villeroy de Galhau.
In addition, changes in the law should ensure that money laundering with cryptocurrencies is prevented. The EU states agreed to pass a law that would enable the authorities to trace crypto transactions. However, platform-independent wallets remain excluded from the regulation.
Can cryptocurrencies be regulated?
However, uniform regulation of cryptocurrencies is likely to be difficult for the G7, as the different states have different views on the freedom of the (crypto) markets. The EU and the UK are already going their separate ways when it comes to regulation and are pursuing different approaches. However, the G7 can set a rough framework in which the regulation of cryptocurrencies should move. This would be a huge win for the crypto industry.
IS Crypto Regulation Good?
Overall, the G7 regulation project is positive news for the crypto industry. Unregulated markets enable money laundering and crime. In addition, mature regulation could prevent crash situations like that of the Luna coin. Such situations inhibit innovation and the industry’s image much more than regulations.Appropriate legislation could bring the crypto industry closer to the financial markets. This would also have positive effects, as more money could flow into the crypto market. This could further increase the reputation of cryptocurrency.Overall, the regulations enable economic and technological development that makes it possible to better integrate cryptocurrencies, blockchain & Co into the real economy.