G7 seeks tougher crypto rules

G7 nations want to tighten the screws on crypto.

The G7 countries want to tighten the screws on crypto. But this could lead to conflicts within the body.

The seven major industrial nations are planning to push for tougher global crypto standards. This reports from the Japanese news agency Kyodo News, which cites prior knowledge. The G7 leaders plan to present the proposals at the upcoming meeting in Japan in mid-May.

It's not yet clear which rules the panel wants to flesh out. Since the legal status of cryptocurrencies varies among member countries, it's possible the G7 will first establish a uniform legal standard. For concrete steps, the Financial Stability Board (FSB) proposals are likely to serve as guidance. That board published a list of global crypto-regulation measures last October. The FSB aims to publish a final draft in July 2023.

Additionally, IMF representatives reportedly reiterated that G7 countries shouldn't recognize cryptocurrencies as legal tender. The IMF launched the call earlier this month.

Crypto Regulation: Who will have the upper hand?

Which uniform standards the G7 will ultimately settle on will depend on where member states can agree. In fact, the topic has the potential to flare up within the body, because while countries like Germany and France already have EU-wide rules under MiCA, the U.S. takes a more restrictive approach.

For example, the U.S. Securities and Exchange Commission (SEC) has already charged several providers, including industry giants like Paxos, Kraken, and Coinbase, over alleged trading of unregistered securities. The Federal Reserve has even issued public warnings to banks looking to dabble in crypto.

It's unlikely the U.S. regulators' crackdown will spill over into Europe. American authorities faced pressure after the FTX collapse. In the EU, MiCA is believed by some experts to have prevented such a scenario. Regulation of the bloc would be at the international forefront. It's hard to imagine a 180-degree turn now and the U.S.'s restrictive stance suddenly being followed.

From mid-May, when the G7 meets in Hiroshima, Japan, there should be clarity for the crypto space. Beyond crypto, the panel will need to find solutions to many bigger issues. With still-high inflation and the war in Ukraine, there's now also a new banking crisis.