A number of regulators around the world have been calling for a joined-up approach, with the U.S. Treasury Secretary making a similar plea to President Joe Biden recently.
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Tougher, international regulation for cryptocurrencies could be on the horizon.
The Financial Stability Board says it's going to make recommendations for a crypto crackdown to G20 finance ministers and central bank governors in October.
Its stated goal is to promote consistency internationally — and avoid "regulatory arbitrage," which could allow businesses or malicious actors to take advantage of relaxed rules in some parts of the world.
A number of regulators around the world have been calling for a joined-up approach, with the U.S. Treasury Secretary making a similar plea to President Joe Biden recently.
In a statement on Monday, the FSB warned:
"Cryptoassets, including so-called stablecoins, are fast-evolving. The recent turmoil in cryptoasset markets highlights their intrinsic volatility, structural vulnerabilities and the issue of their increasing interconnectedness with the traditional financial system."
Executives added that the collapse of a major player could result in "large losses" being suffered by investors, undermine confidence in the market, and cause a contagion effect that spreads to other parts of the ecosystem. And, in future bull markets, there are fears this could hit traditional finance, too.
"An effective regulatory framework must ensure that cryptoasset activities posing risks similar to traditional financial activities are subject to the same regulatory outcomes, while taking account of novel features of cryptoassets and harnessing potential benefits of the technology behind them."
The FSB is calling for cryptoassets that perform a similar role to conventional instruments in the real world to fall under the principle of "same activity, same risk, same regulation," but goes on to admit:
"Cryptoassets 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."
Businesses operating in this sector are also being urged to ensure that they achieve full compliance with legal obligations in the jurisdictions where they're based, too.
The FSB pointed to "the recent turmoil in cryptoasset markets" as evidence for why this approach is needed — and it appears that the organization is particularly setting its sights on stablecoins.
Acknowledging that they're being increasingly used, the statement added:
"Stablecoins should be captured by robust regulations and supervision of relevant authorities if they are to be adopted as a widely used means of payment or otherwise play an important role in the financial system."
There are fears that a lack of regulation "could pose significant risks to financial stability" — especially if adequate reserves to back up the stablecoins in circulation aren't maintained with transparency at all times.
