G20 Summit Leaders to Discuss Regulations on Crypto Assets
This year’s G20 Summit, a group comprised of the world’s 19 largest economies and the European Union, will meet on June 8th and 9th of this year in Fukuoka, Japan, to discuss some of the world’s most pressing issues. Last year’s summit, held in Buenos Aires, Argentina, notably expressed concerns regarding crypto assets. Specifically, the organization was concerned about the use of crypto assets for the purposes of money laundering and terrorism.
Crypto assets, unlike traditional currencies and assets, do not require a central bank or any type of centralized authority in order to securely transfer funds or ownership of an asset from one individual to the next. The lack of a centralized, and in most cases state run, authority creates an environment where individuals who engage in illicit activity can openly and freely transfer money.
Following the G20 summit in 2018, officials released a statement regarding their position on crypto assets,
In order to reap the full benefits of technological innovation, we will continue to monitor the potential risks of crypto-assets and to assess multilateral responses as needed. We acknowledge there is an FATF standards for crypto and other virtual assets with further assistance from FATF. We look forward to IOSCO's work on crypto-asset platforms. We are also committed to enhancing cyber resilience, and ask the FSB to report to the 2019 Summit on progress on its initiative identifying effective tools relating to a financial institution's response to and recovery from a cyber-incident.
The Financial Action Task Force (FATF) is “an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction”. Currently, the FATF recommends that countries handle the transfer crypto assets (called virtual assets by the FATF) in line with the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) guidelines put in place by the International Monetary Fund (IMF).
However, because of the decentralized nature of crypto assets, tracking transactions to a given entity and then enforcing regulations on that entity can prove to be incredibly difficult.
Included on the list of invited guest countries and international organizations for this year’s G20 summit is the IMF, and it is expected that the G20 countries in conjunction with the IMF will agree on new international regulations in regard to money laundering and the financing of terrorism through the use of crypto assets.
Money laundering through crypto assets, for the current moment at least, handles a marginal amount of the global total. Rob Wainwright, director of the European Union Agency for Law Enforcement Cooperation (Europol), estimates that 3-4% of the £100bn illicit funds generated in Europe every year are laundered through cryptocurrency. The fact is that most of the worlds terrorism financing and money laundering is still done through traditional means. Crypto assets may be able to travel across borders seamlessly, but the asset is worthless if it cannot be exchanged for goods, services, or a local currency.
Traditional banking methods remain the most common form of money laundering. One of the highest profile money laundering cases of the last decade has been the HSBC Scandal, where Europe’s largest bank had to pay a $1.9 billion fine for allowing at least $881 million earned from the sale of illicit substances, as well as moving money for Saudi Arabian banks linked to terrorist organizations.