Financial Stability Watchdog Proposes Rules for Global Crypto Regulation
The Financial Stability Board (FSB) announced Monday its plans to propose global regulations for crypto assets later this year after the sharp market drawdown emphasized the need for regulation of the crypto sector.
Crypto Drawdown Highlights the Need For Regulation
Before this, the FSB, an international watchdog consisting of G20 regulators and central banks, has been only keeping an eye on the crypto assets without taking specific steps to regulate the sector.
However, the crypto market has been battered this year due to a number of factors including geopolitical tensions, 40-year-high inflation, and aggressive interest rate hikes, which have underscored the volatility and uncertainty around the actor, the watchdog said.
“The failure of a market player, in addition to imposing potentially large losses on investors and threatening market confidence arising from crystallisation of conduct risks, can also quickly transmit risks to other parts of the crypto-asset ecosystem,” the FSB wrote in a statement.
Last month, the world’s largest cryptocurrency Bitcoin has slipped below the $20,000 mark, touching the lowest level since December 2020.
The sharp slump in Bitcoin and other cryptocurrencies this year has shaken investors’ confidence in risk assets such as crypto and stocks, only a year after securities from both markets rose to multi-year highs.
The FSB Calls for Tighter Stablecoin Regulation
The crypto drawdown was exacerbated when algorithmic stablecoin TerraUSD (UST) collapsed in May, sending shockwaves through the entire crypto market.
The sharp slump in UST, which was meant to maintain a 1:1 peg to the U.S. dollar, also led to an unprecedented sell-off for its sister token LUNA, which crashed to $0.
The FSB weighed in on the stablecoin situation, arguing they should be significantly regulated before being used as a payment method.
“The FSB will report to the G20 Finance Ministers and Central Bank Governors in October on regulatory and supervisory approaches to stablecoins and other crypto-assets,” the FSB added.
While the watchdog is not authorized to propose and pass laws on its own, the members of the organization are able to apply its regulatory standards within their respective jurisdictions.
Join our Telegram group and never miss a breaking digital asset story.
EU and U.S. Treasury Take Steps to Regulate the Crypto Market
One of the leaders of the FSB is the European Union (EU), which announced a myriad of new regulations for the crypto market at the start of this month.
Even though cryptocurrencies and other digital assets are mainly used for “speculative purposes”, they do not operate in an unregulated environment hence they must adhere to the existing rules.
On Thursday, the U.S. Treasury introduced a new framework for international crypto regulation after U.S. President Joe Biden signed an executive order.
Do you think the crypto market regulation is important? Let us know in the comments below.