With the current crypto winter having wiped $2 trillion off the industry and investors, the Financial Stability Board (FSB) proposed on Tuesday that companies dealing in cryptocurrencies should set aside capital like banks when engaging in similar activities.
This was the watchdog organization’s first attempt at developing global regulations. According to the proposed legislation, stablecoins would be compelled to centralize their supply, and big cryptocurrency platforms might be split up.
The crypto winter has strengthened their view of existing structural weaknesses in these markets, Klaas Knot, the Dutch central banker who heads the Financial Stability Board, said in a letter to the finance ministers of the world’s 20 largest nations that he sent on behalf of the FSB.
The Financial Stability Board (FSB) has stated that cryptocurrencies, which currently have a combined value of approximately $935 billion compared to their all-time high of $3 trillion in November of the previous year, are not significant enough to pose a threat to the nation’s financial stability; however, rules are required to regulate a possible recovery.
According to what Knot stated in his letter, concerns over the threats that they represent to the stability of the financial system are thus likely to return to the forefront sooner rather than later. He went on to say that the present turbulences in the industry have once again highlighted the need for a comprehensive strategy for the regulation of crypto-assets.
In the agency’s words:
Several crypto-asset lenders failed during the recent market turmoil as a result of vulnerability to runs, thin capitalization, concentrated exposures to risky entities, and risky trading and business ventures.
Notably, the FSB has said that it hopes to have credited cross-border payments feasible within one hour and with transaction costs of around 1% by 2027, and is now investigating a variety of options to achieve this aim.