The collapse of UST triggers supervision, and many countries emphasize strengthening regulatory measures for DeFi and encryption
Since May 10, when the largest algorithmic stable coin, UST, was seriously de-anchored, and LUNA collapsed and fell into a death spiral, the entire crypto market was driven down, and the overall market was unstable. The chain reaction also attracted the attention of regulators from all over the world.
As of the press release on May 17, according to incomplete statistics, within 7 days, many regulatory agencies, including the United States, Germany, South Korea, Spain, the United Kingdom, the European Union, and the International Securities Regulatory Commission, have expressed their desire to strengthen the DeFi and encryption market. related measures for supervision.
Regulation on stablecoins
On May 10, the Federal Reserve released the “Financial Stability Report” and emphasized the risk of running on stablecoins. Some types of money market funds (MMFs) and stablecoins remain prone to runs, and domestic banks have lower capital risks, but some money market funds, bond funds and stablecoins still have structural vulnerabilities, the report wrote. Back in January, Federal Reserve researchers published a study on the risks and benefits of stablecoins that said the Financial Stability Oversight Board could step in to oversee stablecoins if Congress does not enact new laws targeting the industry.
At a meeting on Capitol Hill on May 10, U.S. Treasury Secretary Yellen talked about the regulation of U.S. dollar stablecoins in the crypto market. Yellen believes that legislation for the regulation of U.S. dollar stablecoins is imminent. The risk, as we all know, is that Terra UST went through a bout of decline today.
At a financial markets conference hosted by the Atlanta Fed on May 11, Nellie Liang, the U.S. Treasury’s undersecretary for domestic financial affairs and report leader of the U.S. President’s Working Group on Financial Markets (PWG), said that even now there is largely no prudence. Regulated stablecoins are also subject to national-level Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) requirements.
On May 12, U.S. Treasury Secretary Yellen once again pointed out that Terra is a real example of the risks of stablecoins. The Treasury Department is gearing up to develop a stablecoin risk report. Yellen reiterated the need for a comprehensive framework for stablecoins.
On May 12, the European Commission is considering strict limits on the ability of stablecoins to replace fiat currencies in widespread use, according to a document. EU finance ministers have proposed tough measures aimed at preventing stablecoins from replacing the euro, and have called for a halt to issuance if a single day’s volume exceeds 1 million or the transaction value exceeds 200 million euros. The document is marked “off-paper”, meaning it does not reflect the official position of the Committee. European Union lawmakers and the government are trying to finalize a landmark cryptocurrency law known as Market Regulation in Crypto Assets (MiCA), with the committee to hold closed-door negotiations at a later stage.
On May 13, according to CNBC reporter Ryan Browne, the U.K. government is preparing to take further action on stablecoins after the collapse of the UST, and the government has made it clear that some stablecoins are not suitable for payment purposes because they have unbacked cryptoassets. Common feature. The government is planning to bring stablecoins under regulation for electronic payments, meaning issuers like Tether and Circle could be regulated by the UK’s Financial Conduct Authority (FCA).
In addition, the Korea Financial Services Commission and the Financial Supervisory Authority recently asked domestic cryptocurrency exchanges to understand the current status of Luna-related trading volumes and closing prices, the number of investors holding Luna and Terra, the number of people by amount, and investments exceeding 1 million won. number of persons. In addition, data on the countermeasures and measures taken by domestic cryptocurrency exchanges in response to the Luna incident, as well as the reasons for the decline as judged by the exchanges, are also requested.
Crypto becomes top focus area for global regulators
The financial world focuses on cryptocurrencies as stablecoin terraUSD (UST) crumbles, markets crash. Bitcoin was trading at a 16-month low early Thursday morning. Ashley Alder, chairman of the International Securities Commission (IOSCO), an association of market regulators, said that a joint body responsible for coordinating global cryptocurrency regulation is urgently needed and could become a reality within the next year. There is a clear need for a global organization aimed at coordinating cryptographic rules, Alder said. Right now, nothing like this is happening in the cryptocurrency space. That could change around the same time next year.
Ashley Alder also noted that the growth of the digital currency market and its increasing ties to mainstream finance have made crypto a top area of focus for regulators around the world. Ashley Alder said: “Crypto is clearly on the agenda and now stands alongside COVID-19 and climate change as one of the three ‘C’s’ that are top areas of focus for regulators.”
Additionally, on May 13, SEC Chairman Gary Gensler re-emphasized his claim that cryptoassets are securities and should be regulated. The policymaker continues to make claims for the crypto-asset industry for the agency responsible for regulating U.S. securities. Gensler is seeking to take full control of the regulation of the crypto industry, which could impose severe restrictions on companies and investors in the country. He claimed that few crypto assets work like commodities or digital gold, which is why institutions should have jurisdiction over them.
On May 14, Pablo Hernández de Cos, president of the Bank of Spain and chairman of the Basel Committee on Banking Supervision, explained that the cryptocurrency space and decentralized finance (defi) need to be quickly regulated to avoid the risk of financial instability. Hernandez de Cos also mentioned how this quick approach should bring the crypto-financial system into regulation before it gets bigger. Despite this staggering growth, crypto-assets still represent only around 1% of total global financial assets, and banks’ direct exposure to risk has so far been relatively limited, he said. However, we know that these markets have the potential to expand rapidly and pose risks to individual banks and overall financial stability. In addition, he recommends a “proactive and forward-looking regulatory approach” to the topic, claiming that a balance can be struck between welcoming these technologies and reducing their risks.
On May 14, the Central African region’s banking regulator reminded member states of its ban on cryptocurrencies. The Central African Banking Commission, which oversees the banking sector in the six Central African Economic and Monetary Communities, said its ban was aimed at ensuring financial stability. This is a reminder from the Central African region’s banking regulator about its ban on cryptocurrencies, weeks after member state Central African Republic made bitcoin legal tender. The announcement came as the cryptocurrency posted massive losses on Friday after the collapse of the so-called stablecoin TerraUSD swept the market.
On May 16, SEC Chairman Gensler said that the SEC and the CFTC plan to jointly regulate some tokens.
On May 17, Germany’s financial regulator said DeFi needs to comply with new regulations, citing the risk of hacking and fraud. Birgit Rodolphe, anti-money laundering officer at BaFin, Germany’s financial regulator, said that “if DeFi is going to become a real competitor in traditional financial markets, it will not work without specific new regulations.” “Ideally, these regulations would of course be consistent across the EU to prevent market fragmentation and boost Europe’s collective innovation potential, including DeFi applications, as well as insurance, lending and securities,” she added.
Cryptocurrency assets are highly speculative and their investors need more protection, otherwise they risk losing trust in the market, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said on May 17. Gensler said that while the crypto market is considered decentralized, the reality is that most activity occurs on a handful of exchanges, which, along with token issuers, need to work with the SEC to improve industry rules and Information disclosure. He pointed to fundamental market principles such as “anti-fraud, anti-manipulation, ensuring there is no front-running, ensuring orders are real and not fictitious.” In addition, Gensler said the SEC will continue to act as a “police on call.” , while working with the Commodity Futures Trading Commission to ensure all cryptocurrencies are covered.