The recent turmoils in the global crypto market have left many organisations and government bodies calling for the need to regulate the speculative sector. Under this backdrop, the Group of Twenty (G20) watchdog Financial Stability Board (FSB) said on July 11 that it plans to propose a set of “robust” global rules for cryptocurrencies in October. The crypto market has been facing an unprecedented meltdown since May this year, starting with the de-pegging of the TerraUSD stablecoin. This eventually led to LUNA losing nearly all its value and the Bitcoin (BTC) price plunging to as low as $18,000 last month.
Interestingly, the FSB has so far limited itself to monitoring the crypto sector, saying that it didn’t pose a systemic risk, as reported by Reuters. However, owing to the recent market upheavals, cryptocurrencies’ volatility, structural vulnerabilities, and growing links to the wider financial system have been highlighted, as per the FSB.
For those unaware, the FSB comprises treasury officials and central bankers from the G20 forum. While the FSB has no lawmaking powers, its members do commit to applying its regulatory principles in their own jurisdictions.
The body said in a statement, “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.”
Commenting on the TerraUSD meltdown, the FSB said that stablecoins need to be subject to robust regulation if they are to be used as a means of payment. It also added that crypto-assets are primarily used for “speculative purposes” but don’t operate in a “regulation-free space.”
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.