Global financial supervision calls for urgent” measures to contain crypto risks

The risks that are cryptocurrencies for global financial stability could "escalate quickly", warned leading political decision -makers on Wednesday, when they demanded urgent measures to ensure that a crisis on the market for digital assets can be contained.

The Financial Stability Board, which gives the G20 countries recommendations for financial rules, said on Wednesday that political decision-makers have to act quickly in view of the closer connection with the traditional financial system in order to create rules for the market for digital assets.

"There is clearly a higher level of urgency," said Klaa's knot, the governor of the Dutch Central Bank, who became chairman of the FSB resident in Basel in December and described how the board was "calmed down" beforehand and said that there is no major risk due to its size and lack of connection to traditional financial markets.

"What we see now is..

The market value of crypto-assets such as Bitcoin and ether rose from around $ 350 billion to over $ 3 trillion last year in early 2020. Since then it has fallen for a little more than $ 2 trillion.

Some parts of the cryptom market and its connections to the rest of the financial system are difficult to assess due to "considerable data gaps", said the FSB.

So far, global supervisory authorities have welcomed crypto with a patchwork of measures, including tough access in China and the efforts of Great Britain to restrict crypto advertising and to register crypto companies for compliance with money laundering and struggle for terrorism.

The FSB is working on global standards for digital assets, which according to Knot should "get a lot progress in 2022".

"There is strong pressure from all jurisdiction that believe that these risks develop quickly," he said. “If you have a server, you can take it under your arm and place it all over the world and start out with the output of these assets, correct?

"So this is really global nature, a global business that requires a global and globally harmonized coordinated reaction."

In the publication on Wednesday, the FSB warned against crypto risks that the collapse of a large cryptocurrency could have oversized effects by triggering a crisis of trust in other investment classes.

Knot said that it was impossible to predict the "destabilizing effect in the entire financial sector" of a run on even a single crypto-asset such as a stable coin-a kind of crypto-asset, the value of which is linked to a fixed currency or a currency basket. But he said the probability of infection to other parts of the financial markets "naturally increased" in harmony with the strong increase in the size of the cryptoma market.

The FSB also warned that large banks and other systematic financial institutions are "increasingly ready" to get involved in crypto, and pointed out that global stable coins cause special risks for financial stability.

"An disordered run due to a loss of trust on A [Global Stablecoin] that has achieved a significant extent could lead to disorders in the real economy and attacks on the wider financial system," said the FSB.

The FSB and other bodies are already working on how the risks of global stable coins can be tackled.

"Regulation is always a reactive business because innovation takes place in industry," said Knot. "We will always sit in the second coach, but I think the distance between the first and the second coach has become much smaller over time. There is definitely more urgency now."