Amid recent market turmoil, the Financial Stability Commission on Monday said it would propose global rules for the crypto sector. The FSB said the current turmoil shows the need to make progress in regulating cryptocurrencies.
“The FSB will report to G20 Finance Ministers and Central Bank Governors in October on regulatory and supervisory approaches to stablecoins and other central banks. electronic money-assets,” the FSB, a regulator, treasury official and central banker from the G20 countries, said in a statement.
Meanwhile, Federal Reserve Vice Chairman Lael Brainard said that the recent turmoil in the cryptocurrency market does not pose “systemic risk” to the broader financial system, but authorities legal loopholes need to be closed to protect consumers and ensure stability.
Fed officials are closely monitoring the turmoil in crypto assets, which has exposed vulnerabilities related to leverage, liquidity and settlement, Brainard told a Bank of England conference on Wednesday. Six, according to her prepared remarks.
“Despite significant losses for investors, the crypto financial system does not appear to be large enough or linked to the traditional financial system to pose systemic risk,” added Brainard.
“This is the right time to establish what crypto activities are allowed on regulated entities and under what constraints so that spillovers to the core financial system remain under control. good.”
The crypto universe continues to be plagued by intense volatility, with Bitcoin prices down as much as 75% from record highs over the past seven months, the Fed official said. Some stablecoins, or digital assets pegged to a fiat currency, have faced significant outflows and are prone to run-ins, she said.
Brainard called attention to the spillover risk of stablecoins, which are often used as collateral for transactions. A central bank digital currency, which will be issued and backed by the government, could provide a secure alternative and “enhance stability,” she said.
While the Fed is studying the pros and cons of developing a digital currency, central bank officials have yet to make a decision on whether to create one, saying they want Congress to make more decisions.
