ENGLAND — Following recent market turmoil that has highlighted the need for regulation of the “speculative” sector, the Financial Stability Board (FSB) announced on Monday that it would propose “robust” global rules for cryptocurrencies in October.
The Group of 20 economies’ (G20) Financial Stability Board (FSB), a group of regulators, treasury officials, and central bankers, has so far restricted itself to monitoring the cryptocurrency sector because it does not present a systemic risk.
However, the recent turmoil in the cryptocurrency markets, according to the FSB, has brought to light their volatility, structural vulnerabilities, and growing connections to the larger financial system.
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The failure of a market player “can also quickly transmit risks to other parts of the crypto-asset ecosystem” according to the FSB. This is in addition to the fact that it could result in investors suffering significant losses and endangering market confidence.
The largest cryptocurrency, bitcoin, has seen its value fall by roughly 70% since hitting a record high of US$69,000 in November. On Monday, it was trading at US$20,422, leaving many investors with losses.
Since the collapse of the TerraUSD stablecoin earlier this year, markets have been shaken by withdrawals and transfers from significant cryptocurrency companies Celsius Network and Voyager Digital.
If stablecoins are to be accepted as a form of payment, strict regulation is required, according to the FSB.
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Stablecoins and other crypto-assets will be the subject of a report from the FSB to the G20 Finance Ministers and Central Bank Governors in October, the FSB stated.
Although the FSB does not have legislative authority, its members agree to implement its regulatory principles in their home countries.
The watchdog is falling behind the European Union, a significant FSB member, which this month approved extensive new regulations for the cryptocurrency market.
Cryptoassets, according to the FSB, are primarily used for “speculative purposes,” but they don’t operate in a “regulation free space” and must abide by pertinent, current regulations.
Many nations mandate anti-money laundering controls for cryptocurrency businesses.
The FSB stated that its members “are committed to acting against violations and promoting compliance by using the enforcement powers within the legal framework in their jurisdiction.”
