The Financial Stability Board (FSB), which brings together the G20 countries, proposes an international regulation of crypto assets, which many stable cryptocurrencies, including Terra and its Luna ‘token’, would not comply with.
In a letter, FSB (Financial Stability Board) Chairman Klaas Knot of the Netherlands tells G20 finance ministers and central bank governors that “an effective regulatory framework should ensure that of cryptocurrencies are subject to comprehensive regulation, proportional to the risks they represent”.
Finance ministers and central bank governors from the G20 will meet in Washington on October 13-14.
Luna and luna classic, Terra’s tokens, fell in mid-September after a South Korean court issued an arrest warrant for Do Kwon, the network’s founder, and others.
Earth’s ecosystem already collapsed in May following massive sell-offs and a major capital outflow after its dollar-pegged stablecoin UST lost parity with the dollar in the face of an impending Federal Reserve interest rate hike. US (Fed).
“Crypto assets and markets must be subject to effective regulation” because they are growing rapidly and there may come a time when they pose a threat to global financial stability due to their size, structural problems and links to the traditional financial system, adds the FSB
It also warns that risks can escalate rapidly and therefore timely policy responses are needed.
Regulation must ensure that crypto assets and intermediaries that have an economic function equivalent to that of traditional financial instruments and intermediaries are similarly regulated, according to the principle of “equal activity, equal risk, equal regulation”.
The FSB wants cryptocurrency markets to be regulated due to contagion risks to traditional finance, especially short-term funding markets.
The regulation proposal of the European Union (EU), known as MiCA (Markets in Crypto Assets), also considers proportionality necessary and provides special treatment for stable digital currencies (“stablecoins”).
MiCA requires cryptocurrency buying and selling platforms to explicitly warn consumers about the risk of loss.
Furthermore, all companies offering cryptocurrency services will need an authorization to operate within the EU.
The national authorities will be obliged to issue the authorizations within a period of three months.
The FSB sees MiCA as an important step and a change in the regulatory landscape.
FSB Secretary General Dietrich Domanski told a virtual news conference that he has consulted with stakeholders and the responses will be incorporated into the final recommendations they will publish in mid-2023.
The control body urges cooperation and coordination between countries and the exchange of information.
He acknowledges the progress made in establishing strong regulation and supervision of cryptocurrencies, but says much remains to be done.
The FSB, based in the Swiss city of Basel, was created at the G20 meeting in London in 2009 in response to the financial crisis and has since supervised financial stability.
Source: TSF
