The Financial Stability Board (FSB) has issued a statement on the international regulation and supervision of crypto-asset activities.

The international body which monitors and makes recommendations on the global financial system, stated that recent ‘turmoil’ in the cryptocurrency – including the 98 per cent devaluation of the TerraLuna currency overnight – has highlighted the intrinsic volatility, structural vulnerabilities, and the issue of cryptocurrencies’ increasing interconnectedness with the traditional financial system.

When a market player ‘fails’, in addition to imposing potentially large losses on investors and threatening market confidence, such volatility also impacts other parts of the crypto-asset ecosystem, the FSB said.

The organisation said in a statement: “The FSB will continue to facilitate cross-border and cross-sectoral cooperation among national financial authorities and international standard-setting bodies as they work towards developing a common understanding of the wide spectrum of crypto-assets as well as regulatory and supervisory policies.”

Commenting on the safeguarding of the traditional financial ecosystem, the FSB said: “An effective regulatory framework must ensure that crypto-asset activities posing risks similar to traditional financial activities are subject to the same regulatory outcomes, while taking account of novel features of crypto-assets and harnessing their benefits.”

It was also noted that stablecoins should also be subject to robust regulation by the relevant authorities.

The FSB added: “A stablecoin needs to be held to high regulatory and transparency standards, maintain at all times the reserves that preserve stability of value and meet relevant international standards.”

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