Introduction
The global governance of digital currencies has advanced significantly, with institutions addressing risks in crypto-assets, establishing stablecoin regulatory frameworks, coordinating central bank digital currency (CBDC) standards, and enhancing cross-border payment roadmaps. However, challenges persist, including lagging regulatory adaptation, geopolitical divisions, and implementation hurdles. This article explores the governance framework, key issues, challenges, and strategic recommendations for China’s proactive engagement.
Digital Currency Global Governance Framework
Hierarchical Structure
Global financial governance operates across three tiers:
- Macro Level: G20 sets strategic agendas.
- Pillar Institutions: FSB, IMF, and BIS translate agendas into actionable policies.
- Standard-Setting Bodies: CPMI, IOSCO, and FATF develop technical rules.
Governance follows a networked approach, where G20 identifies priorities, pillar agencies conduct research, and specialized bodies draft regulations.
Key Governance Themes and Progress
1. Crypto-Asset Risk Regulation
- G20 Focus: Since 2018, AML/CFT measures for crypto-assets.
- FSB Findings: Market risks could destabilize financial systems via confidence/wealth effects.
- FATF Standards: Expanded from virtual currencies (2015) to all virtual assets (2019).
👉 Crypto-asset compliance strategies
2. Stablecoin Regulatory Frameworks
- G20 Mandate: Full legal resolution required before stablecoin operation.
- FSB Recommendations: 10 high-level principles for global stablecoins (2020).
- IOSCO View: Treats stablecoins as regulated securities.
3. CBDC Collaboration
- BIS Leadership: Joint projects with G7 central banks since 2020.
- Core Principles: Emphasize interoperability and cross-border payment integration.
4. Cross-Border Payment Enhancements
- FSB Roadmap: Targets 2023 completion for stablecoin/CBDC modules.
- IMF/BIS Role: Research on CBDCs in跨境 payments.
Challenges in Governance
1. Regulatory Lag vs. Innovation
- Complex rule-making processes delay adaptations.
- Limited private-sector engagement hampers前瞻性 policies.
2. Geopolitical Fragmentation
- Developed vs. Developing Nations: Divergent risk tolerance splits governance camps.
- CBDC Standards: Western bloc resists China’s e-CNY influence.
👉 Geopolitics and digital currencies
3. Implementation Barriers
- New Regulated Entities: Challenges for nations lacking infrastructure.
- FATF Compliance: Developing states struggle with virtual asset provider oversight.
Recommendations for China
1. Domestic Regulatory Development
- Public-Private Dialogue: Align rules with innovation trends.
- Phased Approach: Identify gaps, then introduce targeted regulations.
2. Western Collaboration
- Knowledge Sharing: Adopt best practices from EU/US frameworks.
- Joint Initiatives: Engage in BIS-G7 CBDC projects to mitigate isolation.
3. Leadership in Developing Nations
- Advocacy: Amplify Global South voices in governance forums.
- Capacity Building: Support technical assistance for FATF compliance.
FAQs
Q1: Why is crypto-asset regulation fragmented globally?
A1: Differing national risk assessments lead to varied approaches, from bans (India) to embrace (EU).
Q2: How do CBDCs impact traditional banking?
A2: They may disrupt intermediation but improve payment efficiency.
Q3: What’s the timeline for global stablecoin rules?
A3: FSB aims for final standards by mid-2025.
Q4: How can smaller nations participate effectively?
A4: Through coalition-building and leveraging multilateral platforms like IMF.
Conclusion
China must balance innovation with governance, fostering partnerships while advocating equitable frameworks. Strategic engagement will shape the future of digital currency ecosystems.