Today, the Financial Stability Board (FSB) put forth some objectives calling for the centralization of stablecoin issuance and the dissolution of powerful crypto platforms.
The FSB’s recent plans may push stablecoins to concentrate and deconstruct crypto conglomerates.
After the recent turmoil in the crypto market, the Financial Stability Board, a watchdog organization and standard-setter for the global financial system supported by central banks and finance ministries, wants to see a comprehensive international rulebook that targets conflicts of interest in complex operations and algorithmic stablecoins like the now-defunct terraUSD.
According to the report, stablecoins should be centrally issued and backed by a fiat currency reserve. The concentration of these coins would prevent them from becoming too powerful and fragmenting the cryptocurrency market as a whole.
The FSB also recommends that platforms with significant crypto holdings be dissolved to avoid conflict of interest. This would prevent stablecoins from becoming too reliant on a few prominent players and allow for more competition and innovation.
The FSB’s proposals came after a tumultuous few months for the crypto market. Bitcoin and other major altcoins have seen significant dips in value, with many blaming unstable stablecoins for exacerbating the problem.
In a letter to the finance ministers of the 20 most powerful nations in the world, Klaas Knot, the Dutch central banker who chairs the FSB, stated that the current “crypto winter has reinforced our assessment of existing structural vulnerabilities in these markets.”
He pointed to FSB’s worries about liquidity mismatches, heavy leverage, and improper business structures in the closely interconnected crypto sector.
After a turbulent year that saw the price of significant assets like bitcoin (BTC) and ether (ETH) fall and the complete collapse of businesses like crypto lender Celsius Network, Knot added, “This instability has once again underscored the necessity for a comprehensive strategy to crypto-asset regulation.” The reports on Tuesday are a “big step” in that direction.”
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Source: Cryptocurrency - investing.com
