The G20 watchdog proposes the first global crypto rules in October

Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are located on the PC motherboard in this illustration taken June 29, 2021. REUTERS / Dado Ruvic / Illustration / File photo

LONDON, July 11 (Reuters) – The Financial Stability Board (FSB) said Monday it would propose “robust” global rules for cryptocurrencies in October, following recent unrest in markets that have highlighted the need to regulate the “speculative” sector.

The FSB, a body of regulators, financial officials and central bankers from the group of 20 economies (G20), has so far limited itself to monitoring the crypto sector, saying it poses no systemic risk.

But recent turmoil in crypto markets has highlighted their volatility, structural vulnerabilities and growing links to the broader financial system, the FSB said.

“The failure of a market participant, in addition to inflicting potentially large losses on investors and threatening market confidence as a result of the crystallization of behavioral risks, can also quickly transfer risks to other parts of the crypto-asset ecosystem,” the FSB said in a statement.

The value of bitcoin, the largest cryptocurrency, has fallen around 70% since the record high of $ 69,000 in November and was traded at $ 20,422 on Monday, leaving many investors at a loss.

TerraUSD stablecoin collapsed earlier this year, and withdrawals and transfers from major crypto companies Celsius Network and Voyager Digital have rattled the markets.

Stable coins should be captured by robust regulation if they are to be used as a means of payment, the FSB said.

“The FSB will report to the G20 finance ministers and central bank governors in October on regulatory and supervisory approaches to stack coins and other cryptocurrencies,” the FSB said.

The FSB has no legislative authority, but its members undertake to apply their regulatory principles in their own jurisdictions.

The watchdog is after the EU, a leading member of the FSB, which agreed on comprehensive new rules for the crypto market this month. read more

The FSB said that cryptocurrencies are mainly used for “speculative purposes”, but that they do not operate in a “free space for regulation” and must comply with relevant existing rules.

Many countries require crypto firms to control money laundering.

“FSB members are obligated to use the enforcement authorities within the legal framework of their jurisdiction to promote compliance and act against violations,” the FSB said.

Reporting by Huw Jones Editing by Louise Heavens and Mark Potter

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