Issue Brief

Cryptocurrency and Blockchain policies in G20 nations

Introduction

Blockchain is defined as a secure database across a shared network of participants, where up-to-date information is available to all participants at the same time. Given the transparency and distributed ownership of the blockchain, the security of cryptocurrencies, which are monetary tokens developed on individual blockchains, appeal to investors that seek a secure, stable asset and alternative to traditional fiat currency. As a result, millions of cryptocurrency investors have poured trillions of dollars into these tokens to diversify their portfolios. The global cryptocurrency market capitalization stands at USD 3.7 trillion as of January 31^st, 2024¹ which places the cryptocurrency market amongst the largest stock exchanges by total capitalization.

Moreover, blockchain companies have started to develop software tools on existing blockchain platforms like Ethereum, a decentralized blockchain platform that executes and verifies application code. A central component of the Ethereum blockchain is smart contracts, which is a transaction protocol that is designed to execute or document events depending on the terms of a specified contract or agreement.

Therefore, as cryptocurrency and blockchain is increasingly adopted by participants in the global economy, governments are rushing to develop frameworks to support the development of blockchain technology within their borders while also ensuring that unfair practices are not enabled by the technology.

Blockchain regulations and initiatives in G20 members

Japan recognized cryptocurrencies in 2017 under the Payment Services Act (PSA), which recognized Crypto Asset Exchange Services Providers (CAESP) formally. Japan legally defines crypto-assets as digital (crypto) currencies that are usable to pay an unspecified individual, to be “securities” explicitly but does require CAESPs to register under the Financial Services Agency (FSA). Japan has a positive view on cryptocurrency with 3.7 million active crypto asset accounts as of 2022 and a dedicated Digital Space Fund, with USD 660 million in AUM, that is focused on supporting startups in fields of emerging technologies, including blockchain² . Moreover, Japanese corporate houses are increasingly adopting and expanding into the cryptocurrency space.

The European Union has also developed regulatory frameworks to govern digital assets. According to the European Union, cryptocurrencies are digital representations of value or rights that fall under three broad categories: asset-referenced tokens, e-money tokens, and utility tokens. Under European Union rules, blockchain companies would need to register formally with the European Union to operate within the bloc’s borders³ .

The European Union’s markets in Crypto-Assets (MiCA) regulation came into force in December 2024. MiCA intends to expand existing European Union regulations on financial instruments and products to cover crypto-assets and their issuance to protect consumers from market abuse by cryptocurrency issuers. Moreover, the European Union has formed the European Blockchain Services Infrastructure (EBSI), a peer-to- peer network of interconnected nodes of blockchain infrastructure, where each member of the European Blockchain Partnership (EBP) of the 27 EU countries operates at least one node⁴.

South Korea’s Virtual Asset User Protection Act (VAUPA) came into force in July 2024 and is South Korea’s first all-encompassing regulation on the crypto-currency sector⁵. Under VAUPA, firms are required to secure insurance or maintain reserve funds to hedge against hacks and liquidity issues. Additionally, the regulation mandates that local cryptocurrency exchanges keep 80 percent of user deposits in secure, cold wallets with an interest rate of 1 to 1.5 percent.

Moreover, the VAPUA establishes a 24-hour surveillance network under the Financial Services Commission (FSC) that monitors for illegal and suspicious trading activity. The FSC recently announced plans to begin phasing in institutional trading in cryptocurrencies as well as lay groundwork to launch cryptocurrency spot ETFs, which are financial instruments that track the price of cryptocurrencies by holding significant volumes of the cryptocurrency they are tracking.

India is another country in the G20 that has embraced cryptocurrencies. In 2023, the Government of India implemented anti-money laundering regulations as well as Know Your Customer (KYC) norms under the expanded Prevention of Money Laundering Act (PMLA). Finally, in 2024, the Securities and Exchange Board of India (SEBI) also proposed a multi-regulatory framework on cryptocurrencies to structure oversight of cryptocurrencies. India’s Ministry of Electronics and Information Technology (MEITY) published its National Strategy on Blockchain that proposes the development of a national blockchain framework⁶.

The United States of America has embraced cryptocurrencies and is currently investing significantly in leveraging the technology in its fiscal management. President Trump announced an executive order titled Strengthening American Leadership in Digital Financial Technology that intends to transform the USA into a world leader in cryptocurrency. Under the executive order, the USA will form a working group that will propose new digital asset regulations and create a national cryptocurrency stockpile. While the Task Force has not yet announced any policy indicators, the executive order indicates that the USA will promote a de-regulated environment for cryptocurrencies, which may increase innovation and freedom for corporations to develop blockchain solutions within the country.

G20 actions on cryptocurrency

The G20 prioritizes implementing a coordinated and comprehensive policy and regulatory framework to address risks related to crypto assets and endorsed a crypto- asset policy roadmap during India’s G20 Presidency⁷ . The Synthesis paper, prepared jointly by the International Monetary Fund (IMF) and Financial Stability Board (FSB), identifies key objectives for the G20’s vision on crypto-asset regulation, including promoting the implementation of policy frameworks; building institutional capacity beyond G20 jurisdictions; enhancing global coordination, cooperation, and information sharing; and addressing data gaps⁸.

Brazil’s G20 Presidency requested an update on the progress of the initial IMF-FSB crypto-asst policy roadmap, which was articulated in the IMF-FSB G20 Crypto-asset Policy Implementation Roadmap: Status report. The status report states that continued growth of the cryptocurrency market and its integration into the traditional financial ecosystem could pose significant systemic risks.

The paper also mentions that crypto-asset activities that originate from offshore jurisdictions as well as the prevalence of non-compliance with applicable laws and regulations present significant hurdles for regulatory authorities. Finally, the paper concludes by stressing on the need for a globally comprehensive and coordinated approach to regulating the crypto-asset industry.

Given the growing investor interest in cryptocurrencies and expansion of the market, policymakers and industry across the G20 countries can articulate a common and defined framework in consultation with all stakeholders to ensure global coordination.

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