Specifically, the Financial Stability Board (FSB) – the international body that monitors and makes recommendations about the global financial system – has called the novel asset class an ‘unreliable store of value’ in need of ‘robust regulation’, according to the regulator’s letter to the G20 finance ministers and central bank governors dated on July 11. The letter issued a warning about the global financial system’s pre-existing vulnerabilities illuminated by the increasing inflation, decreased growth, and tighter global financial conditions, as well as that these circumstances could cause further problems. In the part of the letter that covers cryptocurrencies, the FSB stated that:
Underscoring the need for strong regulation
According to the letter, the recent crisis in the crypto market “highlights the importance of advancing the ongoing work to address the risks posed by crypto-assets” and “brings into sharp focus their intrinsic volatility, structural vulnerabilities and the issue of their increasing interconnectedness with the traditional financial system.” In order to prevent the potential major financial damage and loss of market confidence caused by the spillover from a single crypto market player’s failure: As Finbold reported earlier, FSB was working on unveiling global crypto regulations by October 2022, referring to the planned regulations as ‘robust’, in response to the recent crypto sector turmoil that saw most investors suffering heavy losses. The most recent letter is an update to this work.
