Klass Knot, the Chairman of the Financial Stability Board (FSB), has issued a warning regarding the growing use of cryptocurrencies. Knot said that the cryptocurrency sector could cause notable harm to the monetary system in the future.
FSB Chair warns against crypto
Knot said that the cryptocurrency sector lacked a clear regulatory framework that could be used to protect investors. He said that wrongdoers could use digital assets in the current market because they can escape regulatory scrutiny.
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The economist also talked about the ongoing conflict between Russia and Ukraine and how cryptocurrencies could be used in that situation to facilitate illegal activities. He said that there was an increased possibility of digital assets being used for money laundering, cybercrime, and ransomware attacks in the situation.
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He also talked about the high rate at which the cryptocurrency market had grown. He said that the sector’s rapid growth proved that it posed a risk to the global monetary sector and that regulations needed to be introduced faster.
“The bottom line of our assessment is that crypto assets are fast evolving and could soon threaten global financial stability. These markets’ rapid evolution and international nature also raise the potential for regulatory gaps, fragmentation, or arbitrage,” he added.
The executive also said that one of the objectives of the FSB was to create a comprehensive regulatory framework for digital assets. He stressed that these regulations were necessary for unbacked stablecoins and cryptocurrencies. The FSB would join hands with other global regulatory bodies such as the Financial Action Task Force and other government agencies to regulate crypto spaces, including decentralized finance (DeFi).
“Thanks to its broad international and cross-sectoral membership, including the sectoral standard settler, the FSB is well-placed to take a leading role in the design of a coherent framework for crypto assets,” Knot concluded.
The global crypto regulatory framework
The number of cryptocurrency investors worldwide has grown, which is creating a need for strong regulations for the sector. Governments and lawmakers worldwide are calling upon the adoption of new rules that will regulate the buzzing sector.
In Europe, a regulatory framework for crypto assets is already taking shape. The President of the European Central Bank, Christine Lagarde, has urged the EU to strengthen crypto regulations to ensure that it is not used for illicit activities including bypassing sanctions.
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Cryptoassets are a highly volatile unregulated investment product. No UK or EU investor protection.
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