The Financial Stability Board (FSB) has pledged to unveil new regulatory proposals for the global digital currency industry in October. While the regulator has stayed away from the industry, it says that recent developments like the Terra LUNA debacle have made regulating the industry critical.
In a press release, the Basel, Switzerland-based organization pointed out the systemic risks it believes digital assets and stablecoins pose to the global economy and what it thinks is the best way forward for regulators.
FSB is a body of treasury officials, central bankers, and financial regulators from the Group of 20 (G20) countries. It’s hosted by the Bank for International Settlements (BIS) and monitors and makes recommendations about the global financial system.
“The FSB is working to ensure that crypto-assets are subject to robust regulation and supervision. The FSB will report to the G20 Finance Ministers and Central Bank Governors in October on regulatory and supervisory approaches to stablecoins and other crypto-assets,” the organization said.
In its proposal, it plans on laying out recommendations for international consistency of regulatory and supervisory approaches, applying the “same activity, same risk, same regulation” model, especially towards stablecoins. It believes this will reduce the risk of fragmentation and regulatory arbitrage.
The body has refrained from proposing digital asset regulations until now. However, recent events have reeled it in, it said. These include the drastic dip in digital asset prices this year and “the failure of a market player.” This year has also seen some significant players fold as the never-ending liquidity injected into the market dried up amid a wider economic slowdown. Celsius and Voyager Digital are the two most notable victims.
Stablecoins is one of the areas that the organization has taken a keen interest in. This comes at a time when the industry has been rocked by the collapse of the UST algorithmic stablecoin, which folded under pressure in May, pulling LUNA down as well and with them, over $58 billion in investor funds.
The FSB’s proposals to regulators are as far as they can go as the body has no lawmaking power. However, its members commit to applying its regulatory principles and proposals in their individual jurisdictions.
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