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Earlier this week, ministers from the world’s top economies, the G7, called for greater speed as financial watchdogs introduce comprehensive crypto regulation. This comes shortly after Terra’s demise saw several crypto users suffer considerable losses in the space of a week.
G7 Contacts FSB to Hurry Things Up
The stablecoin failed to maintain its dollar peg and crashed as low as $0.07, with sister token LUNA not far behind. This created a ripple effect as general market anxiety destabilized even other stablecoins like DEI and USDX. Reports state that the G7 responded to these happenings with a letter to the Financial Stability Board (FSB).
The world’s largest, most developed economies make up the G7. These are the US and UK, Canada, France, Italy, Japan, Germany, and the EU. Over a meeting in Koenigswinter, Germany, the global leaders decided on the FSB document, which begins:
In light of the recent turmoil in the crypto-asset market . . .”
Based in Basel, Switzerland, the FSB is a global body that came into prominence after 2008’s financial crisis. They formulated several policies and reforms that helped balance out the economic situation. The FSB had previously committed to providing a report by October this year addressing the regulatory framework for stablecoins.
The Group of Seven’s letter detailed a request for well thought out, all-inclusive laws regarding stablecoins. They pushed for faster development within a given timeline, predating the organization’s conference in Germany. The members have scheduled their next meeting for June this year.
Stablecoin Concerns Worldwide
Terra’s downfall sparked concern among financial watchdogs worldwide. Efforts to bolster the stablecoin included the LUNA Foundation Guard providing $750M worth of BTC and an equal portion of UST. However, the foundation’s BTC sale resulted in more downward pressure on the cryptocurrency, worsening the broader crypto decline.
US Treasury Secretary Jane Yellen also called for stablecoin regulation by the end of this year. Though she later retracted this statement, she noted Terra as an example of the systematic risk of stablecoins. Additionally, Francois Villeroy de Galhau, Governor of France’s Central Bank, weighed in.
In Paris earlier this week, Villeroy declared that stablecoins were wrongly named. He believes the recently turbulent market highlights these digital assets as “possibly very unstable.” According to the Governor, the MiCA bill was a start, but EU officials need to work more efficiently on the regulation of crypto assets.