The Financial Stability Board (FSB) said on Monday it would propose robust global rules for cryptocurrencies in October, after recent market turmoil highlighted the need to regulate the speculative sector.
The FSB, a body of regulators, treasury officials and central bankers, has so far limited itself to monitoring the crypto sector, saying it does not constitute a systemic risk.
But the recent turmoil in crypto markets has highlighted their volatility, structural vulnerabilities and increased links to the wider financial system, the FSB said.
“The failure of a market player, in addition to imposing potentially significant losses on investors and threatening market confidence arising from the crystallization of risky behavior, can also rapidly transfer risk to other parts of the crypto asset ecosystem,” the FSB said in a statement.
The value of Bitcoin, the largest cryptocurrency, has fallen nearly 70% from its November record high of $69,000 and traded at $20,422 on Monday, leaving many investors nursing losses.
The TerraUSD stablecoin crashed earlier this year, and withdrawals and transfers from major crypto firms Celsius Network and Voyager Digital have rattled markets.
The FSB said stablecoins must be seized with strict regulation if they are to be used as a means of payment.
“The Federal Security Council will report to G20 finance ministers and central bank governors in October on regulatory and supervisory approaches to stablecoins and other crypto assets,” the FSB said.
The FSB does not have legislative powers but its members are obliged to apply its regulatory principles in their jurisdictions.
The agency lags behind the European Union, a leading member of the FSB, which approved sweeping new rules for the crypto market this month.
The FSB said that crypto assets are primarily used for "speculative purposes" but do not operate in a "regulation-free space" and must comply with relevant existing rules.
Many countries require cryptocurrency companies to have anti-money laundering controls.
"FSB members are committed to using enforcement powers within the legal framework of their jurisdiction to promote compliance and act against violations," the FSB said.
Also Read: ITR form selection to bank validation: 5 mistakes that a taxpayer should avoid