Cryptocurrencies Being Revised by G7By Sofía Hanna | Wed, 12/09/2020 - 08:00
G7 financial leaders from Canada, France, Germany, Italy, Japan, the UK and the US discussed regulations for cryptocurrencies and their importance to avoid a legal or economic issue and to potentially create a financial advantage. The discussion followed Facebook’s Diem’s recent approval to be used as a cryptocurrency. Regulation seeks to avoid illicit uses of cryptocurrencies and to boost these as tools for a solid global recovery, as stated in an article from Forbes.
Concerns around Diem relate to its potential to disrupt financial stability, threatening privacy and eroding control over monetary policy. This was not the first important issue faced by the Diem. In October, its two financial backups, Visa and Mastercard, pulled out because of a growing concern they had over the Diem, reported Forbes.
"It is clear to me that Germany and Europe will not accept their (cryptocurrencies) entry to the market until the regulatory risks are adequately addressed. We must do everything possible to ensure that the currency monopoly remains in the hands of the states," said Olaf Scholz, German Finance Minister, during the G7 digital reunion.
According to BIS, cryptocurrencies rely on regulated financial institutions, so they are within reach of national regulation. The question is whether regulations that could be implemented could actually be effective. In the same article, Raphael Aver, BIS Principal Economist, explains that cryptocurrencies are based on regulatory actions, from valuation to the volume of transactions.
In an MBN article by Daniel Vogel, Co-Founder and President of Bitso, he mentioned that Mexico has not even scratched the surface regarding digital currencies’ potential. Opportunities that could come from implementing this digital financial tool could be helping people who are not included in the formal financial system. The distribution model by being completely digital can give a new panorama to people who live in remote places and, in general, it could help people who have been rejected by the traditional financial system.
According to Julio César Rojas de la Cruz, Fintech Advisor of RCA Attorneys, cryptocurrencies will become part of the mainstream between 2020 and 2021, especially now that physical money implies a contagion risk. However, concerns regarding anonymity and the use they have been given for illegal activities must be addressed. Cryptocurrencies can even be used in cyberattacks because traceability can be blocked by the user, says Daniel Vogel.