Mid-Week Policy News Roundup, February 22, 2022

G20 Finance ministers and CB Governors on Crypto and Stablecoins

On 17 and 18 February 2022 G20 Finance Ministers and Central Bank Governors met in Jakarta, Indonesia to discuss topics of mutual interest including crypto and stablecoins with the following items being of interest:

Item 4:

“We support the progress made on the work on the framework for the automatic exchange of information on crypto-assets.”

Item 5:

“We reiterate our commitment to strengthening long-term financial resilience of the international financial architecture, including promoting sustainable capital flows and developing local currency capital markets. We will continue our discussion on Central Bank Digital Currencies, to further understand their macro-financial implications for the international monetary and financial system, including for spillovers and capital flows.”

Item 12:

“We will continue to assess and address in a comprehensive manner the potential benefits and risks to global financial stability, arising from the rapid development of technological innovations in the financial sector, including cyber risks and the potential for regulatory gaps and arbitrage posed by crypto-asset markets. We welcome the FSB’s updated assessment of financial stability risks from fast-evolving crypto-asset markets and note that in the absence of effective regulation and supervision, they could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system. We encourage the FSB, in close coordination with other standard-setting bodies, to accelerate and deepen its work to monitor and share information on regulatory and supervisory approaches to unbacked crypto-assets, stablecoins, decentralized finance, and other forms of crypto-assets and to address any gaps and arbitrage, including by recommending coordinated and timely policy actions to preserve global financial stability, thus creating the necessary conditions for safe innovation. We also welcome the FSB’s efforts to promote effective regulatory practices and cooperation on operational resilience in the global financial system in light of evolving risks. We welcome the update report on the progress of the review of the G20/OECD Principles of Corporate Governance.”

Earlier the Bank of Indonesia had published some of its thoughts on how digital payments could aid economic recovery.

OECD: Tax Challenges from Digitalisation

Following on from its recent consultation, the Organisation for Economic Co-operation and Development (OECD) on 18 February 2022 published the submissions it has received along with a further consultation on draft rules for tax base determinations under Amount A of Pillar One. Comments are requested by 4 March 2022.

Fed on Future Financial System

On 18 February 2022, Governor Lael Brainard delivered a speech to the US Monetary Policy Forum, in which he warned that the stablecoin market could come to be dominated by just one or two issuers and that stablecoins would need “. . . strong frameworks for the quality and sufficiency of reserves and risk management and governance.

ECB on CBDCs & Digital Euro Roadmap

On 18 February 2022 the European Central Bank Executive Board Member, Fabio Panetta, delivered a speech extolling the virtues of central bank digital currencies at the US Monetary Policy Forum.

Mr Panetta stated “. . . that in a digital world CBDCs are necessary to preserve the role of central bank money as a stabilising force at the heart of the payments system and to safeguard monetary sovereignty.”

Mr Panetta indicated that work on a digital Euro was ongoing and that by the end of 2023 the ECB could start a ‘realization phase’ to develop and test technical solutions and business arrangements for a digital Euro over the next three years.

Jam-Dex Rollout

On 18 February 2002, the Bank of Jamacia officially launched its central bank digital currency, the ‘Jamacia Digital Exchange’, with the tagline ‘No cash, no problem’. See more here.

It should be said that not everyone was enamored with the aesthetics of the design of the logo as reported on by local media. However, we imagine that as long as Jamacia’s new CBDC works as well as cash most Jamaicans will be satisfied.