FSB Chairman: Crypto Markets Could Soon Threaten Global Financial Stability

Financial Stability Board (FSB) Chairman Klaas Knot raised concerns that the cryptocurrency sector could harm the currency network in the future. In his view, the digital asset market is expanding at a rapid pace, and some tokens are used by criminals for illegal activities. “For this reason, policy action on crypto assets is a priority for the FSB,” the management explained.

FSB Wants to Regulate “Unbacked” Cryptocurrencies

The lack of an appropriate regulatory framework applicable to the digital asset industry has been a problem addressed by many prominent figures. The most recent person to give 2 cents on this matter is Klaas Knot (Governor of the Dutch Central Bank and Chairman of the FSB).

Recently presentation, The Economist argued that Bitcoin and altcoins could operate under the radar of watchers, thus allowing criminals to promote illegal transactions with them. For example, Klaas pointed to the ongoing military conflict between Russia and Ukraine.

He believes the war has “strengthened” the assumption that cryptocurrencies play a role in money laundering, ransomware, and cybercrime.

Central bankers have recognized the rapid development of asset classes in recent years. However, he argued that such progress could pose a threat to the global monetary ecosystem.

“The conclusion of our assessment is that crypto assets are evolving rapidly and may soon threaten global financial stability. The rapid development and international nature of these markets also increases the likelihood of regulatory gaps, fragmentation or arbitrage.”

Klaas Knot, credit: FSB

Klaas said one of the FSB’s main goals is to establish comprehensive rules for the market, especially “unsupported” cryptocurrencies and stablecoins. The agency also aims to work with government agencies such as the Financial Action Task Force to impose a regulatory framework on the DeFi sector.

Dutch concluded, “Thanks to its broad international and cross-sector membership, including sector-standard settlers, the FSB is well positioned to play a leading role in designing a coherent framework for crypto assets.”

politician in favor of regulation

The list of legislators and government officials demanding to impose cryptographic rules continues to grow.

A prominent member of the club is Christine Lagarde, president of the European Central Bank. Shortly after the start of the Russia-Ukraine war, she urged the EU to tighten cryptocurrency regulations. Otherwise, the world’s largest country by land area could use the asset class to circumvent sanctions.

However, it is worth noting that cryptocurrencies are not well suited for these efforts due to their underlying blockchain technology. Binance CEO Changpeng Zhao explained in detail:

“If you look at the data, no one smart enough to do that. Because cryptocurrencies are traceable, governments around the world are becoming increasingly proficient in tracking cryptocurrency transactions. So cryptocurrencies are not suitable for this.”

The next person mentioned is French President Emmanuel Macron. Last month, he said France should dig deeper into the Web3 ecosystem and metaverse. However, he supported the European Parliament’s approach to introducing rules into the digital asset sector by enforcing the MiCA Act (Markets in Crypto Assets).

“Now we have to ensure uniformity of rules across European territories to create a unified market. In this context, I am in favor of rapid progress on the regulation of MiCA,” said Macron.

Featured image courtesy of Het Parool

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