The Financial Stability Board monitors and makes recommendations about the global financial system. The body was established by the G20 at its April 2009 Summit in London.
Recent Calls and Assignments
The board has now called for a set of new rules to guide cryptocurrencies globally. It will submit a report to Central Bank Governors and Finance Ministers of the G20. The report is scheduled to be submitted in October.
The Financial Stability Board’s report is to contain recommendations on regulations and supervision for cryptocurrencies. The recommendation will equally cover stablecoins as well as other digital asset classes.
The body comprises government and central bank officers. It cited the recent market crisis as a stability risk to global finance.
It further highlighted that the failure of one play can have a ripple effect on others. This will transfer high risk to the other parts of the ecosystem. The final result is that it then spills into the traditional financial system.
The Financial Stability Board’s statement made certain references to the market’s stablecoin. It has been under the radar of financial regulators even before Terra collapsed in May.
The Financial Stability Board is based in Switzerland and it coordinates financial stability. Its members are state authorities and central banks from twenty-four countries. These include China, Russia, and the United States.
The Financial Stability Board carries out outreaches with about seventy more countries. Although the board is citing the present market condition as a reason to act in the immediate term. Note that it has been eyeing the crypto sector for a long time.
Earlier Warnings of Coming Risks
In February, the board released a publication where it assessed risks in the cryptocurrency market. It warned that crypto could pose a risk to financial stability as a result of its scale. Other risk factors include vulnerabilities in its structure and rising interconnectedness with traditional finance.
The board’s statement is in tandem with many recent comments from top committees and financial officers.
On the 5th of July, the Financial Policy Committee of the Bank of England issued a warning. It said digital assets might pose a risk to the general financial system one day. Hence, the bank called for enhanced regulations.
The Vice-Chair of the US Federal Reserve, Lael Brainard, also echoed the same sentiment. He said that the crypto sector is in need of strong guardrails.
The European Central Bank is working on a unified regulation for the Eurozone. However, a number of countries are going ahead to implement their individual regulations. They claim they can’t stall crypto activities in their countries while waiting for the ECB.
But these seem to be better than countries where there is an outright ban on crypto activities. Crypto users and traders in such places have to go through the huddle of several expensive third parties.
Yet, there are other countries that are currently considered crypto-safe-havens. El Salvador, the UAE, and recently, the Central African Republic top the list.