In October, the Financial Stability Board will present a report on regulatory and supervisory approaches for crypto assets to the G20 Finance Ministers. Recent market turmoil is being cited by the FSB as an example of the financial stability risks that crypto assets present.
On Monday, the Financial Stability Board (FSB), called for new global regulations for cryptocurrencies. In October, it will submit a report on regulatory and supervisory approaches for stablecoins.
A group of central bankers, regulators and government officials pointed out recent market turmoil as an indicator of financial stability risk. This highlighted the fact that failures of market players can quickly spread risks to other parts and cause spillover effects to traditional finance. The statement of the FSB specifically mentioned “so-called stablecoins”, which were on the agenda of several financial authorities even before the Terra crash.
The FSB, an international organization based in Switzerland, coordinates and promotes international financial stability. Its members are central banks and national authorities from 24 countries, including the USA, Russia, and China. They also conduct outreach with about 70 other countries.
While the FSB is emphasizing market issues as a reason to act, it has been studying crypto for a while. It published a report in February assessing the risks of crypto assets. The report warned that these assets could threaten global financial stability because they are large, vulnerable, and more interconnected with traditional financial systems.
The statement by the FSB is in line with recent comments made by senior finance officials and committees. The Bank of England’s Financial Policy Committee on July 5 warned that crypto assets could one day be a threat to the wider financial system. They called for increased regulation. This sentiment was also echoed last Friday by Lael Brainard (US Federal Reserve vice-chair), who stated that crypto assets need “strong guardrails.”