The Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, will report to the G20 finance ministers and central bank governors in October on regulatory and supervisory aspects of stablecoins and other crypto-assets. It is working to ensure that crypto-assets are subject to robust regulation and supervision.
"Crypto-assets, including so-called stablecoins, are
fast-evolving. The recent turmoil in crypto-asset markets highlights their
intrinsic volatility, structural vulnerabilities and the issue of their
increasing interconnectedness with the traditional financial system," The
Financial Stability Board said in a statement.
An effective regulatory framework must ensure that
crypto-asset activities posing risks similar to traditional financial
activities are subject to the same regulatory outcomes while taking account of
new features of crypto-assets and harnessing potential benefits of the
technology behind them, FSB added in the statement.
Crypto-assets are predominantly used for speculative
purposes and many currently remain mostly outside the scope of or in
non-compliance with financial safeguards, of which participants of these
activities should be fully aware.
On compliance by crypto service providers, the watchdog said
it is committed to using the enforcement powers within the legal framework in
its jurisdiction to promote compliance and act against any violations.
It is important to note that the price of Bitcoin has
dropped by as much as 75 percent from its all-time high over the past seven
months, and it has declined almost 60 percent in the three months since April.
Most other prominent crypto-assets have experienced even steeper declines over
the same period.
"The recent turmoil in crypto-asset markets highlights
the importance of progressing ongoing work of the FSB and the international
standard-setting bodies to address the potential financial stability risks
posed by crypto-assets, including so-called stablecoins," the statement
said, adding that it will continue to facilitate cross-border and
cross-sectoral cooperation among national financial authorities and
international standard-setting bodies as they work towards developing a common
understanding of the wide spectrum of crypto-assets.
In a February 2022 report, it had warned that crypto markets
were fast-evolving and could reach a point where they represent a threat to
global financial stability due to their scale, structural vulnerabilities, and
increasing interconnectedness with the traditional financial system.