Watchdog sounds alarm about overlooked risks in global crypto market: 'Significant gaps'

Experts warn of "significant gaps" in rules governing the global crypto market, which could destabilize the financial sector.

What's happening?

According to Reuters, the Financial Stability Board, established after the 2008 financial crisis, recommended changes to cryptocurrency regulations in 2023 to align them with the mainstream market. 

Some positive changes have been made, but implementation was too "fragmented, inconsistent, and insufficient to address the global nature of crypto-asset markets," per the review.

While stability risks are low, they are increasing as the global crypto market's value has doubled to $4 trillion since last year. 

FSB Secretary General John Schindler told Reuters that it's important to continue monitoring crypto as it becomes more integrated with the conventional financial system. 

"We can all put in place frameworks, but if there are people who are not cooperating and helping each other, it's just going to be really challenging because these things just — they don't observe borders," he said.

Why is this concerning?

"This is consequential," Schindler said of the report. "These crypto assets can move across borders very easily, much more easily than other financial assets."

One of the main issues flagged was that few countries have "complete regulatory frameworks" for stablecoins, per Reuters. While it's not nearly as large as the bitcoin market, stablecoins have grown by nearly 75% over the last year to almost $290 billion, and this growth is expected to continue as the United States imposes new rules. 

Adding to concerns about crypto, the market experienced the largest crash in history in October, with over $20 billion in liquidations. While crypto is popular because it's decentralized, it requires significant water and energy, which drains resources and contributes to global pollution. Some data centers, on the other hand, do use clean energy, and others even finance renewable energy projects.

What's being done to stabilize the market?

The report outlined eight recommendations to accelerate the implementation of "globally consistent rules," according to Reuters. 

To help the climate, you can invest in clean economy stocks and support green cryptocurrencies such as Ethereum, which uses a proof-of-stake network that requires minimal energy use.

What do you think the future of cryptocurrency is? It is the future of currency 😎 It will become more mainstream 🤑 It will never be mainstream 😒 It will fade away completely 🙅 Click your choice to see results and speak your mind.

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