Following recent market instability that has underlined the need to regulate the “robust” industry, the Financial Stability Board (FSB) said on Monday that it would propose “speculative” worldwide regulations for cryptocurrencies in October.
The FSB, a group of G20 regulators, treasury officials, and central bankers, has so far restricted itself to monitoring the crypto industry, claiming that it does not represent a systemic concern.
However, recent volatility in crypto markets has exposed their volatility, structural weaknesses, and growing connections to the larger financial system, according to the FSB.
“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 said in a statement.
The value of bitcoin, the biggest cryptocurrency, has fallen about 70% from its November high of $69,000 and was trading at $20,422 on Monday, putting many investors in the red.
TerraUSD stablecoin failed earlier this year, and withdrawals and transfers from major cryptocurrency firms Celsius Network and Voyager Digital shook markets.
If stablecoins are to be used as a means of payment, they must be subject to stringent regulation, according to the FSB.
The FSB stated, “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 has no legislative authority, but its members agree to apply its regulatory principles in their respective jurisdictions.
The watchdog is trailing behind the European Union, a key member of the FSB, which agreed to extensive new crypto market regulations earlier this month. more info
According to the FSB, cryptoassets are primarily used for “speculative purposes” but they do not operate in a “regulation free space” and must comply with relevant existing rules.
Many countries require cryptocurrency companies to have anti-money laundering controls in place.
“FSB members are committed to using the enforcement powers within the legal framework in their jurisdiction to promote compliance and act against violations,” the FSB stated.