Press statement by President von der Leyen on a new package of restrictive measures against Russia

We wanted to present together the eighth package of sanctions. Last week, Russia has escalated the invasion of Ukraine to a new level. The sham referenda organised in the territories that Russia occupied are an illegal attempt to grab land and to change international borders by force. The mobilisation and Putin’s threat to use nuclear weapons are further steps on the escalation path.
We do not accept the sham referenda nor any kind of annexation in Ukraine. And we are determined to make the Kremlin pay for this further escalation. So today, we are together proposing a new package of biting sanctions against Russia.
The first part concerns the listing of individuals and entities that will be presented by the HR/VP, Josep Borrell, in a moment.
I want to focus on the second part of these sanctions that will further restrict trade. By that, we isolate and hit Russia’s economy even more. So we propose sweeping new import bans on Russian products. This will keep Russian products out of the European market and deprive Russia of an additional EUR 7 billion in revenues. We are also proposing to extend the list of products that cannot be exported to Russia anymore. The aim is here to deprive the Kremlin’s military complex of key technologies. For example, this includes additional aviation items, or electronic components and specific chemical substances. These new export bans will additionally weaken Russia’s economic base and will weaken its capacity to modernise. We will also propose additional bans on providing European services to Russia, and a prohibition for EU nationals to sit on governing bodies of Russian state-owned enterprises. Russia should not benefit from European knowledge and expertise.
The third complex is concerning Russian oil. As you know, Russia is using the profits from the sale of fossil fuels to finance its war. Concerning Russian oil, you might recall that we have already agreed to ban seaborne Russian crude oil in the European Union as of 5 December. But we also know that certain developing countries still need some Russian oil supplies, but at low prices. Thus, the G7 has agreed in principle to introduce a price cap on Russian oil for third countries. This oil price cap will help reduce Russia’s revenues on the one hand and it will keep global energy markets stable on the other hand. Today, in this package, here, we are laying the legal basis for this oil price cap.
And my last point that I want to focus on is: We are stepping up our efforts to crack down on circumvention of sanctions. Here, we are adding a new category. In this category, we will be able to list individuals if they circumvent our sanctions. So for example, if they buy goods in the European Union, bring them to third countries and then to Russia, this would be a circumvention of our sanctions, and those individuals could be listed. I think this will have a major deterring effect. Our sanctions have hit Putin’s system hard. They have made it more difficult for him to sustain the war. And we are increasing our efforts here and moving forward.
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Minimum income: more effective support needed to fight poverty and promote employment

Today, the Commission calls on Member States to modernise their minimum income schemes as part of the ongoing pledge to reduce poverty and social exclusion in Europe. The proposed Council Recommendation on adequate minimum income ensuring active inclusion sets out how Member States can modernise their minimum income schemes to make them more effective, lifting people out of poverty, while promoting the labour market integration of those who can work.
Minimum income is cash payments that help households who need it to bridge the gap to a certain income level to pay the bills and live a life in dignity. They are particularly important in times of economic downturns, helping to cushion drops in household income for people most in need, thereby contributing to sustainable and inclusive growth. They are generally complemented with in-kind benefits giving access to services and targeted incentives to access the labour market. In this way, minimum income schemes are not a passive tool but act as a springboard to improve inclusion and employment prospects. Well-designed minimum income schemes strike a balance between alleviating poverty, incentivising work and maintaining sustainable budgetary costs.
Minimum income and social safety nets must incorporate sufficient incentives and support for beneficiaries who can work to reintegrate in the labour market. Their design should therefore also help to fully realise the potential of the green and digital transitions by supporting labour market transitions and active participation of disadvantaged people.
The social and economic advantages of adequate and targeted social safety nets became even more important during the lockdowns linked to the COVID-19 pandemic. Adequate minimum income is highly relevant in the current context of rising energy prices and inflation following Russia’s invasion of Ukraine as income measures can be targeted to specifically benefit vulnerable groups.
The proposal will help achieve the EU’s 2030 social targets to reduce the number of people at risk of poverty of exclusion by at least 15 million people as set in the European Pillar of Social Rights Action Plan. It will also help Member States reach the goal that at least 78% of the population aged 20 to 64 should be in employment.
Executive Vice-President for an Economy that Works for People, Valdis Dombrovskis, said: “Social protection systems help to reduce social inequalities and differences. They ensure a dignified life for those who cannot work – and for those who can, encourage them back to a job. At a time when many people are struggling to make ends meet, it will be important this autumn for Member States to modernise their social safety nets with an active inclusion approach to help those most in need. This is how we can fight poverty and social exclusion, and help more people into work during this challenging period.”
Commissioner for Jobs and Social Rights, Nicolas Schmit, said: “Today, more than one in five people in the EU are at risk of poverty and social exclusion. Minimum income schemes exist in all Member States, but analysis shows that they are not always adequate, reach all those in need, or motivate people to return to the labour market. Against a backdrop of soaring living costs and uncertainty, we must ensure our safety nets are up to the task. We should pay particular attention to getting young people back into work also through income support, so they do not get trapped in a vicious cycle of exclusion.”
Well-designed social safety nets to help people in need
While minimum income exists in all Member States, their adequacy, reach, and effectiveness in supporting people vary significantly.
Today’s proposal for a Council Recommendation offers clear guidance to Member States on how to ensure that their minimum income schemes are effective in fighting poverty and promoting active inclusion in society and labour markets.
Member States are recommended to:

Improve the adequacy of income support:

Set the level of level of income support through a transparent and robust methodology.
While safeguarding incentives to work, ensure income support gradually reflects a range of adequacy criteria. Member States should achieve the adequate level of income support by the end of 2030 at the latest, while safeguarding the sustainability of public finances.

Annually review and adjust where necessary the level of income support.

Improve the coverage and take-up of minimum income:

Eligibility criteria should be transparent and non-discriminatory. For instance, to promote gender equality and economic independence, especially for women and young adults, Member States should facilitate the receipt of income support per person, instead of per household, without necessarily increasing the overall level of benefits per household. In addition, further measures are needed to ensure the take-up of minimum income by single-parent households, predominantly headed by women.
Application procedures should be accessible, simplified and accompanied by user-friendly information.
The decision on a minimum income application should be issued within 30 days from its submission, with the possibility of reviewing this decision.
Minimum income schemes should be responsive to socio-economic crises, for instance by introducing additional flexibility regarding eligibility.

Improve access to inclusive labour markets:

Activation measures should provide sufficient incentives to (re)enter the labour market, with particular attention to helping young adults.
Minimum income schemes should help people to find a job and keep it, for instance through inclusive education and training as well as (post)placement and mentoring support.
It should be possible to combine income support with earnings from work for shorter periods, for instance during probation or traineeships.

Improve access to enabling and essential services:

Beneficiaries should have effective access to quality enabling services, such as (health)care, training and education. Social inclusion services like counselling and coaching should be available to those in need.
In addition, beneficiaries should have continuous effective access to essential services, such as energy.

Promote individualised support:

Member States should carry-out an individual, multi-dimensional needs assessment to identify barriers that beneficiaries face for social inclusion and/or employment and the support needed to tackle them.
On this basis, no later than three months from accessing minimum income, beneficiaries should receive an inclusion plan defining joint objectives, a timeline and a tailored support package to reach this.

Increase the effectiveness of governance of social safety nets at EU, national, regional and local level, as well as monitoring and reporting mechanisms.

EU funding is available to support Member States in improving their minimum income schemes and social infrastructure through reforms and investments.
Better impact assessments for fair policies
Today, the Commission also presents a Communication on better assessing the distributional impact of Member States’ reforms. It offers guidance on how to better target policies in a transparent way, making sure that they contribute to addressing existing inequalities and taking into account the impact on different geographical areas and population groups, like women, children and low-income households. The Communication covers guidance on the policy areas, tools, indicators, timing, data and dissemination of the assessment. The guidance presented today is also relevant for Member States when designing their minimum income schemes.
Next steps
The Commission proposal for a Council Recommendation on adequate minimum income ensuring active inclusion will be discussed by Member States with a view to adoption by the Council. Once adopted, Member States should report to the Commission every three years on their progress on implementation. The Commission will also monitor progress in implementing this Recommendation in the context of the European Semester. The proposed instrument – a Council Recommendation – gives Member States enough leeway to determine how to best achieve the objectives of this initiative, taking into account their specific circumstances.
Over one in five persons – or 94.5 million people in total – were at risk of poverty or social exclusion in the EU in 2021. Social safety nets play a key role in supporting these people and helping them to (re)enter the labour market if they can. However, more effective social protection systems are needed, with around 20% of jobless people at risk of poverty not being eligible to receive any income support and estimates of around 30% to 50% of the eligible population not taking up minimum income support.
The European Pillar of Social Rights includes principle 14 on the right to adequate minimum income. To promote social inclusion and employment and ensure that no one is left behind, the Commission has presented many additional initiatives, which complement today’s proposal. This includes the proposal for a Directive on adequate minimum wages to ensure that work pays for a decent living; the European Child Guarantee to give children free and effective access to key services; and the European Care Strategy to improve the situation especially of women and people in the care sector. The Commission Recommendation for Effective Active Support to Employment (EASE) offers guidance on active labour market policies, including upskilling and reskilling. The Council Recommendation on ensuring a fair transition towards climate neutrality, sets out specific guidance to implement policies for a fair transition, with particular attention to vulnerable households. Finally, the Commission proposal for a Regulation on an emergency intervention to address high energy prices seeks to address the dramatic energy price increases by reducing consumption and sharing the exceptional profits of energy producers with those who need help the most.
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ECB | How do markets respond to war and geopolitics?

Russia’s unprovoked invasion of Ukraine marks the return of geopolitical risk to Europe. Here the ECB blog looks at how global stock markets reacted to this risk and what role time and distance have played
Though much ink has been spilled trying to understand stock markets, there is limited evidence on how geopolitics shape their performance. Establishing links between stock market performance and geopolitical concerns is challenging, as geopolitical effects are difficult to identify. We look at the market reaction after the Russian invasion of Ukraine to unveil the effect of geopolitical risk depending on those markets’ distances from Kyiv. We also construct a daily index of geopolitical tensions tailored specifically for this war. Quantifying the effect of geopolitical tensions on markets helps us to assess risks for the economy and financial stability across countries.
The Russian invasion revealed a geopolitical risk premium in equity markets
The Russian invasion of Ukraine reverberated across global equity markets. It is widely acknowledged that it is difficult to identify and measure geopolitical effects because it is usually difficult to isolate these from other compounding factors, as pointed out for instance by Eichengreen et al. (2019 and 2021)[1]. We overcome this challenge by using the physical distance between Kyiv and the capitals of other countries. We use this as a proxy to reflect a country’s exposure to the war itself, in a similar vein as Federle et al. (2022)[2]. The exposure may be due to trade and economic linkages, higher refugee flows or potential military spillovers, putting a strain on economic activity and hence on the associated stock market performance. In peace time, the distance to Kyiv does not influence the cross-country variation in the performance of global equity markets. But in the immediate aftermath of the invasion, distance became an important determinant of their performance. It explained almost 20% in the cross-country variation in equity markets in a sample of 80 countries. In other words, equity markets priced in a negative geopolitical risk premium. Stock prices in countries in the vicinity of the war, in particular stock prices in Europe, were hit much harder than those in parts of the world that are more distant from the invasion (Chart 1). Most European equity markets have subsequently recovered.

Chart 1
Geopolitical risk premium observable in equity markets
Stock market returns vs distance to Kyiv
(y-axis: percentage change, x-axis: log kilometers)

Sources: Haver Analytics, CEPII and ECB calculations.
Notes: The dots show the percentage change in the respective countries’ stock indices within the 14- day period starting on 25 February versus the distance (in log) between the capitals of each country and Kyiv. The first regression line suggests that equity markets in countries bordering Ukraine, notably the European markets, have corrected more significantly in the first days after the invasion compared to other equity markets in the rest of the world that are more distant to the invasion. The second regression line is flat suggesting that the relation does not hold anymore after 40 days as the geopolitical premium fades due to contamination effects from other shocks.

Estimating the change in equity prices over time shows that the geopolitical risk premium, i.e. the effect of a country’s distance to Kyiv on the stock market, was clearly visible in the immediate aftermath of the invasion (Chart 1, 14-days regression line and Chart 2, blue line). But the premium faded away subsequently (Chart 1, 40-days regression line and Chart 2, blue line). It may however resurface depending on the intensity of the conflict. This suggests that equity markets may not be pricing the geopolitical risk premium as a rare disaster event à la Rietz (1988)[3] and Barro (2006)[4], who assume disasters to be permanently reflected in the risk premium, but rather à la Gabaix (2012)[5], in the sense that the risk premium associated with rare disasters varies over time.
A novel daily index of the news-intensity of the Russia-Ukraine war
In order to capture the conflict intensity, we construct a novel daily index of geopolitical tensions, in a similar vein as Caldara and Iacoviello (2022)[6] and Ferrari Minesso et al. (2022)[7]. Our indicator focuses on press coverage of the war in Ukraine (see Chart 2, yellow line). The daily frequency is important so that we capture and monitor perceptions of geopolitical risk from the invasion in a timely fashion. We use Dow Jones Factiva, which gathers articles from major newspapers around the world, to count the number of articles published each day that discuss war and refer to either Russia or Ukraine. When there is a risk of an armed escalation between the two countries, newspapers devote more space to its discussion and the index records higher values. The indicator comoved with the geopolitical premium (see Chart 2, yellow and blue lines, respectively). It peaked on 27 February 2022, shortly after the invasion, declined thereafter and slowly stabilised albeit at a relatively high level as the war in Ukraine has continued.
Russia’s invasion of Ukraine revealed the existence of a negative geopolitical risk premium priced in by equity markets. Using distance to Kyiv as a proxy for geopolitical risk, we show that European equity markets were hit harder compared to the rest of the world but rebounded subsequently. We also construct a novel daily index of geopolitical risk specifically tailored to measure the intensity of the Russian invasion of Ukraine. This indicator peaked shortly after the invasion, declined thereafter but has plateaued at a relatively high level as the conflict drags on.

Chart 2
Geopolitical risk premium and news intensity index of Russian invasion in decline
Estimated geopolitical risk premium and news-based war indicator
(lhs y-axis: estimated effect, percent, rhs y-axis: percent of total articles)

Sources: Dow Jones Factiva and ECB calculations.
Notes: The blue line displays the estimated geopolitical risk premium, i.e. the effect of a country’s distance to Kyiv (in log) on the changes in equity prices between the 21 February 2022 and the date indicated on the x-axis, estimated in a rolling cross-sectional regression. The yellow line presents a news-based Russia-Ukraine war indicator constructed as the share of news articles resulting from a search on Dow Jones Factiva, which gathers articles from major newspapers around the world, using the following search query: (“Russia” AND “war”) or (“Ukraine” AND “war”). Sources: All top sources (i.e. Reuters Newswires or The Wall Street Journal – All sources or Dow Jones Newswires or Major News and Business Sources or Press Release Wires). Subject: All subjects. Language: English. The index is standardised for the total number of articles published each day in the same news outlets to have a consistent measure across time. The frequency is daily since 1 February 2022, a 7-day moving average is displayed.


Livia Chiţu
Eric Eichler
Massimo Ferrari Minesso
Peter McQuade

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Scaling up sustainable finance in low and middle-income countries: High-Level Expert Group kick-starts work

The High-Level Expert Group (HLEG) on scaling up sustainable finance in low and middle-income countries meets in Brussels today for the first time kick-starting their reflection on the challenges and opportunities of sustainable finance in partner countries with a view to providing recommendations to the Commission on how to scale up funding from the private sector. At a time when the multiple global crises are taking a heavy toll on the global economy, overturning years of progress towards the Sustainable Development Goals (SDGs), helping partner countries in accessing finance for their sustainable infrastructure projects is critical to a global recovery, in line with the Global Gateway strategy.
Commissioner for International Partnerships, Jutta Urpilainen said: “Russia’s war of aggression in Ukraine and its economic fallout has dramatically impacted countries around the world, increasing the funding gap needed to achieve the Sustainable Development Goals. Public resources continue to play an important role, but this is not enough. As Team Europe, we are stepping up our efforts to bring in private capital towards sustainable investments. I look forward to the recommendations of the High-Level Expert Group. These will feed into the EU’s forthcoming EU sustainable finance strategy for low and middle-income countries that will underpin and boost the delivery of Global Gateway.”
Commissioner for Neighbourhood and Enlargement Negotiations Oliver Várhelyi added: “In these difficult times, it is crucial to scale up sustainable finance in all low- and middle-income countries, including in our immediate Eastern and Southern Neighbourhood. These countries need substantial investments more than ever, especially now, in the aftermath of Russia’s war of aggression in Ukraine. If we want to see our partners in the Neighbourhood undertake the necessary reforms and invest in sustainable projects, more resources are needed, and we need to further mobilise the private sector. Our Economic and Investment plans designed together with our partners will undoubtedly have a key contribution in this regard.”
The group’s task is to identify over the next nine months how the European Commission could in a Team Europe approach contribute to bringing about the needed financing from the private sector for the massive investments required to tackle the most pressing global challenges and ensure sustainable development. The recommendations, expected to be presented around mid-2023, will inform a comprehensive Commission strategy to scale up sustainable finance in low- and middle-income countries. The strategy will be instrumental to bridge the investment gap in partner countries and to implement the EU Global Gateway strategy.
The group gathers 20 highly qualified members selected on the basis of their expertise, from a company or institution they represent, while taking into account geographic and gender balance. The 20 members of the group are:

Ms. Ayaan Adam, Senior Director and Chief Executive Officer, African Finance Corporation Capital Partners
Dr Kenneth Amaeshi, Professor, European University Institute
Mr. Obaid Amrane, Chief Executive Officer, Ithmar Capital
Mr. Antoni Ballabriga, Global Head of Responsible Business, Banco Bilbao Vizcaya Argentaria
Mr. Hans-Ulrich Beck, Global Head ESG Products / Executive Vice-President, Product Strategy and Development, Sustainalytics
Dr G Ganesh Das, Chief – Collaboration & Innovation
Mr. Michael Gotore, Chief Financial Officer, Namibia Power Corporation
Ms. Nadja Håkansson, Senior Vice-President Hub Africa, Siemens Energy Africa
Ms. Laetitia Hamon, Head of Sustainable Finance, Luxembourg Stock Exchange
Mr. Martin Jonasson, General Counsel, Andra AP-fonden
Ms. Judy Kuszewski, Chair, Global Sustainability Standards Board, Global Reporting Initiative
Ms. Elodie Laugel, Chief Responsible Investment Officer & Executive Committee member, Amundi
Ms. Senida Mesi, Leadership Council Member, Sustainable Development Solution Network (SDSN)
Mr. Uche Orji, Managing Director / Chief Executive Officer, Nigerian Sovereign Investment Authority
Dr Nicola Ranger, Head of Sustainable Finance Research for Development, Oxford Sustainable Finance Group, University of Oxford
Ms. Alice Ruhweza, Regional Director for Africa, World Wide Fund for Nature (WWF)
Mr. Thede Rüst, Head of Emerging Markets Debt Boutique, Nordea Asset Management
Ms. Zalina Shamsudin, Head of International Programmes – Asia Pacific, Climate Bonds Initiative
Mr. Claus Stickler, Global Co-Lead, Allianz Investment Management SE
Mr. Iker Vinageras, Head of ESG Solutions, Bolsa Institucional de Valores

Moreover, 20 representatives from the European development finance institutions and multilateral development banks, together with relevant international organisations and fora have been nominated as observers. These are : African Development Bank (AfDB), Spanish Agency for International Development Cooperation (AECID), Asian Development Bank (ADB), Cassa Depositi e Prestiti (CDP), Coalition of Finance Ministers for Climate Action, European Bank for Reconstruction and Development (EBRD), European Development Finance Institutions Association (EDFI Association), European Investment Bank (EIB), Finnish Fund for Industrial Cooperation Ltd (FINNFUND), the Netherlands Development Finance Company (FMO), International Monetary Fund (IMF), Inter-American Development Bank (IADB), International Platform for Sustainable Finance (IPSF), Kreditanstalt für Wiederaufbau (KfW), Organisation for Economic Co-operation and Development (OECD), Proparco (on behalf of AFD group), the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), United Nations Development Programme (UNDP), United Nations Environment Programme – Finance Initiative (UNEP-FI) and World Bank Group.
The establishment of this group was announced in the Strategy for Financing the Transition to a Sustainable Economy, which was published by the Commission in July 2021. In response to the call for applications published in April 2022, the European Commission received a very high number of applications from civil society, academia, the business and finance community and other non-public sector institutions and selected 20 senior, high-level experts from EU member states and partner countries
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Speech by Executive Vice-President Timmermans at the Green Deal Summit in Prague

“Check against delivery”
Good morning everyone,
It is a real pleasure to be here, to be back in the city I have been very often, going back to the 1980s – that will tell you how old I am.
I have seen it go through so many transformations, and one of the biggest experiences in my life is to see these transformations and to have met the incredible people who had the foresight to look for freedom and fight for freedom when this was seen by many in Eastern West as an illusion. People like Vaclav Havel – the man who I admire without limits and whose library is next door.
But I’m not here today to speak to you about challenges’ past. I want to speak to you about challenges of today.
In my view, humanity is being challenged at a level that we have seldom seen before in human history. And all these challenges are coming together at the same time. That is creating an immense amount of insecurity in our population, and that security is sadly very often politically exploited: looking for scapegoats, someone to blame, easy answers to difficult questions.
Now I think this is a time when politicians should have the courage to say that complex problems require complex solutions. And that to complex challenges, there are no easy answers.
In this context, I want to say that the first and foremost challenge we need to face now, we are facing, is Putin’s threat. He has a plan to recreate the Russian Empire. He has a plan to weaken our democracies. He has a plan to divide Europeans with his lives, with his propaganda, with his agents all over the European Union. He has a plan. And if he succeeds in that plan, we will be poor, we will remain dependent on someone who wants to impose his will, our democracy will be undermined, and the personal freedoms so many people have fought for, could be lost.
So our most immediate task today is to stand together, to not let him divide us, to discover, uncover and show his lies, and to make sure we help our citizens go through the next couple of years, which will be very difficult because of the energy situation.
Let me be very clear from the outset. It is easier – clearly also part of Moscow’s agenda – to blame the Green Deal for high energy prices. Well frankly, look back over the last couple of years: he has step by step executed his plan, by step by step reducing the supply of his gas to Europe, which step by step led to the price increase. The price was already high before the war began.
Now, Europe is on the trajectory to stop being dependent on Russian hydrocarbons. At the beginning of the war, the end of February 40% of our gas came from Russia. Today, only 9% from our gas comes from Russia, which is quite an achievement, in quite a short period of time.
The only way we can increase our energy sovereignty over the long run is by no longer being dependent on hydrocarbons.
The only way to do that we don’t have: we have very little of our own gas, we have no oil, coal is really on its way out. So the only way to do that is through renewables and of course, in parts also through nuclear.
That is the only way we can make sure we can provide our citizens and our enterprises with the energy they need to grow and prosper without becoming dependent on those who are trying to use their energy resources to blackmail others.
I have just come back from the United States, where I had a visit to the federal government in Washington, but also to the United Nations. The one thing with all the divisions we have in the world, the one thing everybody agrees on is that we are faced with an existential crisis, which is the climate crisis.
Whether you talk about droughts in Africa and in Europe, whether you talk about the immense drought in China that is crippling the country, whether you talk about the floods. Latest example is Pakistan: one third of the country covered in water. When you talk about all the other issues happening: harvests going wrong all over the world, people fleeing. You know this is a crisis we have to respond to. This is not a crisis we have the luxury to ignore.
The bad news is that it is getting worse and it is getting worse fast. The good news is we can do something about this. We can actually address it and make sure it doesn’t get completely out of hand. And the way to do that, from a European perspective, is the European Green Deal.
It will offer a transformation of our societies and our economies that embraces the opportunities the industrial revolution is offering, and addresses the threats that come with the emissions of CO2 and other gases that threaten our natural environment.
I believe if you want to get to climate neutrality in 2050, you have to have a plan that starts not yesterday, not the day before yesterday, should have started years ago. And Europe has for now decades demonstrated that you can grow your economy and reduce your emissions. There is no contradiction between that. We can do even better.
Czechia for me is one example of a country where – I have been coming here already in this mandate three times, which is more or less the most I have been to any Member State, except perhaps from my own country. Because if I can convince the Czech people, I can convince everyone. Because Czech people are, as lots of other ones told me, I want to get nature, show us and then we will believe it.
And I like that attitude because it gives us an opportunity to show what we are doing. It also gives us an opportunity to show what the possibilities are for Czech citizens and Czech society. The fact that so many Czech citizens are now scrambling to put solar panels on the rooftops shows how rational they are. They know how to bring down their energy bills. They know how to create sustainable energy for themselves. And we need to help them.
Industry need to react to that. There is huge potential for industry in reinventing and building solar panels, heat pumps turbines, and anything adding to that. You know what is the most sold electric car in my country – outperforming Tesla and others – it is the ŠKODA Enyaq, in the Netherlands, that is the most sold electric car.
That is a huge opportunity for ŠKODA and the Czech industry. Now, if I had to answer all the questions Svetlana put on the table, I will be standing here until tomorrow morning. But I promised that I would keep it relatively short so that you could put some questions to me.
The fundamental point I want to make is this: we have never been challenged individually and as a society as badly as today. The way we will overcome the next couple of years, addressing the issue of energy poverty more than anything else, convincing our citizens we are able to make sure they can get through winter without being cold. If we can do that in the next couple of years, then I think after that, the transformation into a green and sustainable economy will be strongly supported, also by the citizens in the Czech Republic.
We have to resist the easy answers the scapegoating. We have to resist the propaganda Putin is trying to use as an instrument as a weapon in his war. We have to understand that he has made out of gas a weapon and we need to react to that.
Let’s stand firm. Let’s stand together and in united Europe. A committed Europe to this transformation. A committed Europe to see Ukraine come out of this victorious is a Europe that is unbreakable.
Thank you.
Compliments of the European Commission.
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EU Council adopts additional €5 billion assistance to Ukraine

The EU Council today formally adopted the decision to provide € 5 billion of additional macro-financial assistance (MFA) to Ukraine, as a matter of urgency.
On 9 September, EU ministers for finance had agreed a statement in support of these additional €5 billion assistance for Ukraine at the informal Ecofin Council meeting in Prague. Today, this additional assistance was formally adopted, after the necessary formal steps were completed within just 11 days.
This financial assistance complements other EU support to Ukraine in the humanitarian, development, customs and defence fields.

The European Union stands by Ukraine. We deliver on our promises and help ensure that the Ukrainian state and its key infrastructure can continue to function despite Russia’s war of aggression. At the next Ecofin meetings, I will push for a swift agreement on the provision of the remaining €3 billion, for which we must also agree on the division of this amount into loans and grants.
Zbyněk Stanjura, Minister of Finance of Czechia

This €5 billion macro-financial assistance will be provided to Ukraine in the form of highly concessional long-term loans. It constitutes the second stage in the implementation of the planned full Union’s exceptional macro-financial assistance to Ukraine for up to €9 billion, announced by the European Commission in its communication of 18 May 2022 and endorsed by the European Council on 23-24 June 2022.
In addition, the decision adopted today equips the EU budget with the means to absorb the risk of losses on these additional loans as well as on the €1 billion loan adopted on 12 July 2022. The latter was fully disbursed in two tranches on 1 and 2 August 2022.
This new MFA operation is part of the extraordinary international effort by bilateral donors and international financial institutions to support Ukraine at this critical juncture.
This decision should be followed swiftly by the adoption of a further decision implementing the third stage of the planned full Union’s exceptional macro-financial assistance for a further amount of up to €3 billion, once the design of that assistance has been determined.
The EU-Ukraine Association Agreement, which entered into force on 1 September 2017, brings Ukraine and the EU closer together. In addition to promoting deeper political ties, stronger economic links and the respect for common values, the agreement has provided a framework for pursuing an ambitious reform agenda, focused on the fight against corruption, an independent judicial system, the rule of law, and a better business climate. The EU has shown continuous support for these reforms, which are crucial for attracting investments, boosting productivity and lifting the standards of living in the medium term.
Among other support instruments, between 2014 and 2022 the EU supported Ukraine through several consecutive macro-financial assistance (MFA) operations that exceeded € 7 billion of loans and grants.
Russia’s unprovoked and unjustified war of aggression against Ukraine since 24 February 2022 has caused Ukraine a loss of market access and a drastic drop in public revenues, while public expenditure to address the humanitarian situation and to maintain the continuity of State services has increased markedly.
The further amount of up to €5 billion of Union’s exceptional macro-financial assistance under this decision is to support Ukraine’s macro-financial stabilisation, strengthen the immediate resilience of the country and sustain its capacity towards recovery, thereby contributing to the public debt sustainability of Ukraine and its ability to ultimately be in a position to repay its financial obligations.
Compliments of the Council of the European Union.
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OECD | Tax policy is playing a key role in promoting economic recovery and responding to the energy price shock

Tax policy is playing a critical role as countries seek to promote economic recovery from the COVID-19 pandemic and respond to the impact of rapid increases in energy prices, according to a new OECD report.
Tax Policy Reforms 2022 describes recent tax reforms across 71 countries and jurisdictions, including all OECD members and selected members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.
The report finds that tax reforms – notably reductions in taxes on labour and more generous corporate tax incentives – have been among the key policy tools that countries have used to stimulate growth and promote economic recovery from the pandemic.
As energy prices rose steeply from the second half of 2021, countries moved quickly to shield households and businesses by providing temporary fiscal support – including tax cuts – and by tapering existing stimulus measures that could add to inflation.
“Recent tax reforms have been targeted at stimulating economic recovery from COVID-19, while countries with the greatest fiscal space have been providing more generous tax benefits for longer periods of time,” said Pascal Saint‑Amans, Director of the OECD Centre for Tax Policy and Administration. “Countries have also used tax policy as one of their main tools in responding to rapid rises in energy prices.”
Personal income taxes and social security contributions were reduced in 2021 in almost all countries covered in the report, with most reductions targeted at lower-income households to support employment and provide in-work benefits. Many countries also increased corporate tax incentives to stimulate investment and innovation.
The most significant VAT reforms focused on the digital economy and e-commerce, including strong growth in e-invoicing and digital reporting requirements. Property tax reforms were less common in 2021, with a small number of countries implementing measures to reduce the use of properties as investment vehicles and improve equity in the housing market.
A Special Feature in this year’s report highlights how tax policy has been used by governments to provide significant support to households and businesses, shielding them from the impact of high energy prices. The report notes that the measures introduced through mid-2022 to lower the price of energy were rapidly deployed and often relatively simple to implement. However, the report also suggests that governments could provide more targeted measures for at-risk groups, improve the resilience of households that are vulnerable to price shocks, and accelerate the development of alternative sources of energy and modes of transport.
To access the report, data, and summary, visit www.oecd.org/tax/tax-policy-reforms-26173433.htm.

David Bradbury, Head of the Tax Policy and Statistics Division in the OECD Centre for Tax Policy and Administration (CTPA) | david.bradbury@oecd.org

Bert Brys, Head of the Country Tax Policy Unit in CTPA | bert.brys@oecd.org

Lawrence Speer, OECD Media Office | Lawrence.Speer@oecd.org | news.contact@oecd.org

Compliments of the OECD.
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European Media Freedom Act: EU Commission proposes rules to protect media pluralism and independence in the EU

The European Commission adopted today a European Media Freedom Act, a novel set of rules to protect media pluralism and independence in the EU. The proposed Regulation includes, among others, safeguards against political interference in editorial decisions and against surveillance. It puts a focus on the independence and stable funding of public service media as well as on the transparency of media ownership and of the allocation of state advertising. It also sets out measures to protect independence of editors and disclose conflicts of interest. Finally, the Act will address the issue of media concentrations and create a new independent European Board for Media Services, comprised of national media authorities. The Commission also adopted a complementary Recommendation to encourage internal safeguards for editorial independence.
Vice-President for Values and Transparency, Věra Jourová, said: “We have seen over the past years various forms of pressure on the media. It is high time to act. We need to establish clear principles: no journalist should be spied on because of their job; no public media should be turned into propaganda channel. This is what we are proposing today for the first time ever: common safeguards to protect media freedom and pluralism in the EU”.
Thierry Breton, Commissioner for the Internal Market, added: “The EU is the world’s largest democratic single market. Media companies play a vital role but are confronted with falling revenues, threats to media freedom and pluralism, the emergence of very large online platforms, and a patchwork of different national rules. The European Media Freedom Act provides common safeguards at EU level to guarantee a plurality of voices and that our media are able to operate without any interference, be it private or public. A new European watchdog will promote the effective application of these new media freedom rules and screen media concentrations so they do not hamper plurality.”
No political interference, no spying, stable funding
The European Media Freedom Act will ensure that media – public and private – can operate more easily across borders in the EU internal market, without undue pressure and taking into account the digital transformation of the media space.

Protection of editorial independence – the Regulation will require Member States to respect the effective editorial freedom of media service providers and improve the protection of journalistic sources. In addition, media service providers will have to ensure transparency of ownership by publicly disclosing such information and take measures with a view to guaranteeing the independence of individual editorial decisions.

No use of spyware against media – the Media Freedom Act includes strong safeguards against the use of spyware against media, journalists and their families.

Independent public service media –where public service media exist, their funding provided should be adequate and stable, in order to ensure editorial independence. The head and the governing board of public service media will have to be appointed in a transparent, open and non-discriminatory manner. Public service media providers shall provide a plurality of information and opinions, in an impartial manner, in accordance with their public service mission.

Media pluralism tests – the Media Freedom Act requires Member States to assess the impact of media market concentrations on media pluralism and editorial independence. It also requires that any legislative, regulatory or administrative measure taken by a Member State that could affect the media is duly justified and proportionate.

Transparent state advertising – the Media Freedom Act will establish new requirements for the allocation of state advertising to media, so that it is transparent and non-discriminatory. The Act will also enhance the transparency and objectivity of audience measurement systems, which have an impact on media advertising revenues, in particular online.

Protection of media content online – building on the Digital Services Act, the Media Freedom Act includes safeguards against the unjustified removal of media content produced according to professional standards. In cases not involving systemic risks such as disinformation, very large online platforms that intend to take down certain legal media content considered to be contrary to the platform’s policies will have to inform the media service providers about the reasons, before such take down takes effect. Any complaints lodged by media service providers will have to be processed with priority by those platforms.

New user right to customise your media offer – the Media Freedom Act will introduce a right of customisation of the media offer on devices and interfaces, such as connected TVs, enabling users to change the default settings to reflect their own preferences.

The proposal is accompanied by a Recommendation setting out a number of voluntary best practices collected from the sector and geared at promoting editorial independence and greater ownership transparency. The Recommendation provides a toolbox of voluntary measures for media companies to consider, such as the conditions for independent creation of editorial content, through empowering journalists to participate in crucial decisions for the functioning of media outlets, to strategies for ensuring long-term stability of news content production.
A European watchdog for media freedom
The Commission proposes to set up a new independent European Board for Media Services comprised of national media authorities. The Board will promote the effective and consistent application of the EU media law framework, in particular by assisting the Commission in preparing guidelines on media regulatory matters. It will also be able to issue opinions on national measures and decisions affecting media markets and media market concentrations.
The Board will also coordinate national regulatory measures regarding non-EU media that present a risk to public security to ensure that those media do not circumvent the applicable rules in the EU. The Board will also organise a structured dialogue between very large online platforms and the media sector to promote access to diverse media offers and to monitor platforms’ compliance with self-regulatory initiatives, such as the EU Code of Practice on Disinformation.
Next steps
It is now for the European Parliament and the Member States to discuss the Commission’s proposal for a Regulation under the ordinary legislative procedure. Once adopted, it will be directly applicable across the European Union. The Commission will encourage discussions, notably as part of the European News Media Forum, on voluntary practices by media companies linked to the accompanying Recommendation.
Independent media are a public watchdog, a key pillar of democracy, as well as an important and dynamic part of our economy. They are crucial in forming a public sphere, shaping public opinion and holding those in power to account. On a global scale, the European Union remains a stronghold for free and independent media.
At the same time, there are increasingly worrying trends across the EU. The Commission has been closely monitoring all those developments through the Rule of Law Report and other tools such as the Media Pluralism Monitor. Challenges identified by the previous Rule of Law reports have led to several EU initiatives, including a recommendation on the safety of journalists and measures to address abusive lawsuits against public participation (SLAPP).
The European Media Freedom Act was announced by President von der Leyen in her 2021 State of the Union Address. It builds on the Commission’s rule of law reports and the revised Audiovisual Media Services Directive, which provides for EU-wide coordination of national legislation for audiovisual media. The act also builds on the Digital Services Act (DSA) and Digital Markets Act (DMA), as well as the new Code of Practice on Disinformation. It is part of the EU’s efforts in promoting democratic participation, addressing disinformation and supporting media freedom and pluralism, as set out under the European Democracy Action Plan.
This proposal complements the recently adopted Recommendation on the protection, safety and empowerment of journalists and the Directive to protect journalists and rights defenders from abusive litigation (anti-SLAPP package). The Media Freedom Act also works in tandem with initiatives related to viability, resilience and digital transformation of the media sector adopted under the Media and Audiovisual Action Plan and revised copyright rules. The proposal is based on extensive consultation with stakeholders, including a public consultation.
Compliments of the European Commission.
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ECB Interview | Bringing inflation back to target

Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Florian Schmidt on 15 September 2022 |
Ms Schnabel, you come from Dortmund, a city of hard workers, or “Malocher” as they are referred to locally. How often do you think about these people in the context of high inflation?
Many people are worried that they won’t be able to pay their energy bills. Some even struggle to pay for food at the end of the month because prices are rising so much. This is of great concern to me because we at the ECB are responsible for price stability in the euro area. It is our task to ensure that annual inflation is at 2% over the medium term. Right now we are far away from our target – inflation is much too high.
Inflation in Germany was 7.9% in August. Are we ever going to see it go down?
Yes, but not immediately, unfortunately. Current inflation is mostly driven by a strong increase in energy prices. Another factor is the pandemic-related disruption to supply chains, which is making many products more expensive. We are also seeing food prices growing significantly around the world. Our monetary policy has little impact on what is happening on global commodity markets.
The ECB’s monetary policy affects inflation mainly through demand. When interest rates increase, loans become more expensive and saving becomes more attractive. This lowers the demand for products – both from consumers, who spend less, and firms, which invest less. Companies can then no longer hike their prices so quickly because there are fewer people who want their products. As a result, inflation falls. But this takes time.
How much time?
Probably a while still. Inflation may continue growing in the short term, despite the recent interest rate hikes.
So when is it going to fall again?
According to our projections, it will take until 2024 for inflation to stabilise around our 2% target.
In other words, you will continue to miss your inflation target for more than a year still. Have you failed?
As I said, current inflation is in large part due to factors we cannot influence directly. The war in Ukraine exacerbates the situation. It weighs on economic growth and drives inflation further up. But we have normalised our monetary policy step-by-step already since December of last year. First, we stopped additional purchases of government bonds. Then, since July, we have increased the policy rates twice significantly, leaving negative and zero interest rates behind. In early September we even hiked rates by 0.75 percentage points. This sent out an important signal: We are doing whatever is needed to bring inflation back to our 2% target.
Much too late, according to critics.
In anticipation of our measures, the interest rates in financial markets have started to rise much earlier, and they rose very fast. It is also worth remembering that ever since the pandemic started, we have been facing enormous uncertainty. When the Omicron wave hit last winter, we didn’t know whether we could be looking at widespread lockdowns once again. In the spring, it was impossible to say what impact the war would have on economic developments and inflation. In the view of the ECB’s Governing Council, the steps taken to reach our medium-term inflation target were appropriate at the time.
Some economists warned about higher inflation as early as spring. Why were ECB experts so wrong?
With the benefit of hindsight we can have a discussion about whether we should have acted a little sooner. But now the interest rate turnaround has started. We are on the right track.
The most recent interest rate hike was the largest in the ECB’s history. Some people are now worried this could choke off the economy. Which is worse: inflation or recession?
The ECB has a clear mandate – price stability. The signal we sent with our latest interest rate hike is clear: we are taking decisive steps to curb inflation and are making sure that it stabilises again at 2% in the medium term.
So economic development doesn’t matter for you?
A looming downturn would have a dampening effect on inflation. Of course, we take this into account when calibrating our monetary policy. However, the starting point of interest rates is very low, so it is clear that we need to continue raising rates.
Will that happen at the next meeting of the ECB’s Governing Council at the end of October already?
I’m expecting that the ECB’s Governing Council will continue to increase interest rates at its next meeting. What I cannot say is how big this hike will be or at what level we will stop increasing rates. We are deciding meeting by meeting, based on an assessment of all the economic and inflation data.
The ifo Institute expects Germany to face a “winter recession”? Do you expect that too?
For the euro area as a whole we are currently expecting an economic stagnation rather than a recession. Unfortunately, the situation in Germany is worse. Owing to its strong dependency on Russian gas, Germany has been especially hard hit. A recession may potentially be unavoidable here.
Will that also cause mass layoffs?
The labour market has proven to be very robust so far. The unemployment rate in the euro area is at a historical low; many countries, Germany included, are even experiencing a shortage of labour. Many firms may deem it in their interest to retain their staff despite challenging business conditions.
Does that mean things might not be so bad after all?
Hopefully, most workers will keep their jobs. But people will nonetheless feel the effects of the high prices, especially those on low incomes, because wages are not keeping pace with the rise in prices.
That may in turn result in high inflation becoming ingrained in the minds of many people. How much does that concern you?
Inflation expectations play a crucial role in our decisions. We see with some concern that more people expect inflation to exceed our 2% target also in the medium term. This makes it all the more important to send clear signals that people can rely on the ECB and that inflation will go down again.
And why should people believe you, now of all times?
Because the ECB has shown repeatedly in the past that it responds appropriately to economic developments. We acted decisively at times when inflation was too low, and during the coronavirus pandemic we contributed significantly to Europe emerging from this severe crisis in good shape economically. In this way we showed that citizens can rely on the central bank. People can trust us; we will fulfil our mandate and ensure price stability.
But what happens if that doesn’t work – and if people nonetheless expect persistently high rates of inflation?
One danger is the emergence of a wage-price spiral. If employees, against the backdrop of rising inflation expectations, demand very high wage increases and businesses then pass these on through even higher prices, wages and prices can drive each other up. But we see no signs of that happening at present. Wage growth has increased, but it is still moderate.
Really? In the current round of wage negotiations, the German metalworkers’ trade union IG Metall alone is demanding a huge wage hike of 8.2%.
So far, wage agreements are nowhere near keeping pace with inflation. Price-adjusted wages are falling, meaning that purchasing power is declining.
So a one-off agreement between employers and employees on a substantial increase would not automatically push up inflation?
We need to avoid that people expect permanently high inflation. That is why we are closely monitoring wage growth dynamics.
The governments of Europe are now deploying an array of instruments in an attempt to relieve the pressure on their citizens. Can the use of such instruments make up for the loss of wealth?
Higher energy prices are making Europe poorer. We have to transfer a larger share of our income abroad to pay for energy imports. Governments can’t do anything to change that in the short term. However, they can take targeted measures to ease particular hardships and prepare for the future. To this end, politicians should not disregard the effects of prices on behaviour. At the end of the day, higher energy prices will help us become less dependent on fossil fuels and thus achieve our climate targets. Moreover, investments are required in order to speed up the transition to renewable energies. When designing fiscal support programmes, care should be taken that they do not further fuel inflation.
How so?
Government relief measures for the broad mass of the population could stimulate demand and push up inflation. We might then have to raise interest rates even more. From a political perspective it may be favourable to appeal to a large share of the electorate with a package of relief measures. But it should always be at the back of our minds that, in the long term, we will have to collectively bear these costs.
Where do you yourself notice this at the moment?
I am able to cope with the current situation. People with higher incomes and wealth will of course be less well off too, but they can more easily draw on their savings to cushion the effects.
And what do you cut back on in your daily life?
First and foremost I try to lower my energy consumption. Not only to save money, but also for environmental reasons.
In conclusion let’s turn to Italy, where the anti-EU candidate Giorgia Meloni of the far-right party Fratelli d’Italia (Brothers of Italy) could become prime minister next Sunday. How concerned are you about that?
We never comment on political developments in individual countries. The ECB is independent and conducts monetary policy for the euro area as a whole. That is why we are guided by inflation in the euro area, even if the situation naturally differs from one country to another.
The level of government debt also differs. Italy has a very high level and will suffer correspondingly in the future from a rise in interest rates.
A country’s ability to service its debt hinges fundamentally on its economic growth. That means that countries must get on a sustainable growth path. The European support package Next Generation EU, which was introduced during the pandemic, plays a significant role in this respect. It’s very important that the growth projects, which are financed through this programme, are pursued consistently and fully implemented. That is a task for national governments. But we are all in the same boat. That’s why it’s important to also develop common solutions at European level in order to overcome the current crisis.
Ms Schnabel, many thanks for this interview.
Compliments of the European Central Bank.
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IMF | Regulating Crypto

The right rules could provide a safe space for innovation
Crypto assets have been around for more than a decade, but it’s only now that efforts to regulate them have moved to the top of the policy agenda. This is partly because it’s only in the past few years that crypto assets have moved from being niche products in search of a purpose to having a more mainstream presence as speculative investments, hedges against weak currencies, and potential payment instruments.
The spectacular, if volatile, growth in the market capitalization of crypto assets and their creep into the regulated financial system have led to increased efforts to regulate them. So too has the expansion of crypto’s many different products and offerings and the evolving innovations that have facilitated issuance and transactions. The failures of crypto issuers, exchanges, and hedge funds—as well as a recent slide in crypto valuations—have added impetus to the push to regulate.
Applying existing regulatory frameworks to crypto assets, or developing new ones, is challenging for several reasons. For a start, the crypto world is evolving rapidly. Regulators are struggling to acquire the talent and learn the skills to keep pace given stretched resources and many other priorities. Monitoring crypto markets is difficult because data are patchy, and regulators find it tricky to keep tabs on thousands of actors who may not be subject to typical disclosure or reporting requirements.
Playing catch-up
To complicate matters, the terminology used to describe the many different activities, products, and stakeholders is not globally harmonized. The term “crypto asset” itself refers to a wide spectrum of digital products that are privately issued using similar technology (cryptography and often distributed ledgers) and that can be stored and traded using primarily digital wallets and exchanges.
The actual or intended use of crypto assets can attract at once the attention of multiple domestic regulators—for banks, commodities, securities, payments, among others—with fundamentally different frameworks and objectives. Some regulators may prioritize consumer protection, others safety and soundness or financial integrity. And there is a range of crypto actors—miners, validators, protocol developers—that are not easily covered by traditional financial regulation.
Entities operating in financial markets are typically authorized to undertake specified activities under specified conditions and defined scope. But the associated governance, prudence, and fiduciary responsibilities do not easily carry over to participants, who may be hard to identify because of the underlying technology or who may sometimes play a casual or voluntary role in the system. Regulation may also have to reckon with the unwinding of conflicting roles that have become concentrated in some centralized entities, such as crypto exchanges.
Finally, in addition to developing a framework that can regulate both actors and activities in the crypto ecosystem, national authorities may also have to take a position on how the underlying technology used to create crypto assets stacks up against other public policy objectives—as is the case with the enormous energy intensity of “mining” certain types of crypto assets.
In essence, crypto assets are merely codes that are stored and accessed electronically. They may or may not be backed by physical or financial collateral. Their value may or may not be stabilized by being pegged to the value of fiat currencies or other prices or items of value. In particular, the electronic life cycle of crypto assets amplifies the full range of technology-related risks that regulators are still working hard to incorporate into mainstream regulations. These include predominantly cyber and operational risks, which have already come to the fore through several high-profile losses from hacking or accidental loss of control, access, or records.
Some of these might have been lesser concerns if the crypto asset system had remained closed. But this is no longer the case. Many functions in the financial system, such as providing leverage and liquidity, lending, and storing value, are now emulated in the crypto world. Mainstream players are competing for funding and clamoring for a piece of the action. This is all leading to greater calls for the “same activity, same risk, same rule” principle to be applied, with the necessary changes, to the crypto world—piling pressure on regulators to act. It is posing another conundrum for public policy, too. How closely can the two systems be integrated before there is a call for the same central bank facilities and safety nets in the crypto world?
Contrasting national approaches
It’s not that national authorities or international regulatory bodies have been inactive—in fact, a lot has been done. Some countries (such as Japan and Switzerland) have amended or introduced new legislation covering crypto assets and their service providers, while others (including the European Union, United Arab Emirates, United Kingdom, and United States) are at the drafting stage. But national authorities have, on the whole, taken very different approaches to regulatory policy for crypto assets.
At one extreme, authorities have prohibited the issuance or holding of crypto assets by residents or the ability to transact in them or use them for certain purposes, such as payments. At the other extreme, some countries have been much more welcoming and even sought to woo companies to develop markets in these assets. The resulting fragmented global response neither assures a level playing field nor guards against a race to the bottom as crypto actors migrate to the friendliest jurisdictions with the least regulatory rigor—while remaining accessible to anyone with internet access.
The international regulatory community has not been sitting idle either. In the early years, the major concern was preserving financial integrity by minimizing the use of crypto assets to facilitate money laundering and other illegal transactions. The Financial Action Task Force moved quickly to provide a global framework for all virtual asset service providers. The International Organization of Securities Commissions (IOSCO) also issued regulatory guidance on crypto exchanges. But it was the announcement of Libra, touted as a “global stablecoin,” that grabbed the world’s attention and added a greater impetus to these efforts.
The Financial Stability Board began monitoring crypto asset markets; released a set of principles to guide the regulatory treatment of global stablecoins; and is now developing guidance for the broader range of crypto assets, including unbacked crypto assets. Other standard-setters are following suit, with work on the application of principles for financial market infrastructures to systemically important stablecoin arrangements (Committee on Payments and Market Infrastructures and IOSCO) and on the prudential treatment of banks’ exposures to crypto assets (Basel Committee on Banking Supervision).
The regulatory fabric is being woven, and a pattern is expected to emerge. But the worry is that the longer this takes, the more national authorities will get locked into differing regulatory frameworks. This is why the IMF is calling for a global response that is (1) coordinated, so it can fill the regulatory gaps that arise from inherently cross-sector and cross-border issuance and ensure a level playing field; (2) consistent, so it aligns with mainstream regulatory approaches across the activity and risk spectrum; and (3) comprehensive, so it covers all actors and all aspects of the crypto ecosystem.
A global regulatory framework will bring order to the markets, help instill consumer confidence, lay out the limits of what is permissible, and provide a safe space for useful innovation to continue.

ADITYA NARAIN is deputy director of the IMF’s Monetary and Capital Markets Department.

MARINA MORETTI is assistant director of the IMF’s Monetary and Capital Markets Department.

Compliments of the IMF.
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