The Group of Seven (G7) inter-governmental political forum has been the latest global body to highlight the need for digital currency regulations. Top finance sector officials from the seven countries have implored the Financial Stability Board (FSB) to establish digital currency regulations quickly.
According to a Reuters report, the ministers and central bankers from the top seven industrial countries made the call while meeting in Germany this week. The concern is being raised in light of the Terra blockchain tokens’ collapse that has caused turmoil in the market.
“In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB (Financial Stability Board)…to advance the swift development and implementation of consistent and comprehensive regulation,” a draft communique from the meeting said.
The G7 comprises Germany, Japan, the U.S., the U.K., Canada, France, and Italy. Individually, several of these countries, including the U.S. and France, have sounded warnings about the risks that digital currencies pose, highlighting the Terra USD (UST) stablecoin de-pegging.
In the United States, Treasury Secretary Janet Yellen stated that the crash was a strong point for why regulations are needed for the rapidly growing industry. Since May 8, when the UST sell-off began fomenting panic, the digital currency market has lost $302.1 billion in value, according to CoinMarketCap.
The FSB is already working on a regulatory framework
The FSB, an international organization that monitors and makes recommendations for the global financial system, has been examining the digital currency market. In a report in February, the body warned that digital currencies, especially stablecoins, could potentially derail global financial stability.
The report highlights the scale, structural vulnerabilities, and increasing “interconnectedness” with traditional financial systems as the main reasons for their concerns over digital assets. The BIS-funded body recommended that regulations be made to rein in the sector.
“Crypto-asset markets are 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,” the report said.
While it feels concerned about digital currencies, the G7 has also been pushing for the adoption of central bank digital currencies (CBDCs). The seven countries reached a landmark agreement last year on how CBDCs should be structured.
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