- Global regulators beam searchlight on stablecoins following Terra crash.
- G7 urges regulators to make crypto regulation a priority.
As the crypto market continues to come to terms with the ramifications of the Terra blockchain crash, the G7 members have urged regulators to make crypto regulation their priority before the organization’s meeting next month.
A recent Reuters report revealed that central banks and finance ministers from top economies making up the G7 organization had sent a joint letter to the Financial Stability Board (FSB) to push for a “consistent and detailed crypto regulation” before the G7’s meeting in Germany next month.
The FSB is an advisory board for the bank of international settlements, with members drawn from the apex banks of 24 nations. Some members of reputable international organizations are also members of the FSB. However, the FSB doesn’t have any statutory powers of its own.
Apart from the European Union, the G7 also consists of the following top world economies; the United States, Canada, Japan, France, United Kingdom, Germany, and Italy.
The consequences of the Terra network crash
The letter is one of the consequences caused by the crash of the Terra network (its stablecoin, UST, and native token, LUNA), which led to the significant decline in the crypto market.
While speaking on may 17 at the Paris Emerging Market Forum, Francois Villeroy De Galgeau, France’s apex bank governor, remarked that “it has become necessary to regulate and oversee the digital asset space. They must be interoperable across jurisdictions consistently and appropriately.” “Otherwise, they pose risks to the international financial system.”
He further said, “this and many more are some of the issues we plan to discuss at the next G7 meeting.” The Terra network crash began when its algorithmic stablecoin (UST) lost its USD peg on May 8.
After the UST stablecoin lost its peg, the group responsible for ensuring the full functioning of the Terra ecosystem (Luna Foundation Guard) made frantic efforts for the UST to reclaim its USD peg.
It loaned $750M worth of BTC from its reserves to OTC traders and another $750M worth of UST. However, the decision backfired as more intense selling pressure on the BTC created more panic and decline in the wider crypto market.
The crypto market remains bearish
Coinmarketcap data indicates that the overall evaluation of the crypto market has reduced by $302.1B between May 8 and May 19. The events in the crypto market haven’t gone unnoticed by lawmakers within and outside the US.
While speaking at the congressional hearing last week, Janet Yellen (US’s Treasury Secretary) referred to the Terra crash as one of the ways stablecoins can adversely affect the traditional financial infrastructure.
However, she made it clear that the financial system isn’t at risk despite the events happening in the crypto space. Despite the unsavory events in the crypto market, Microstrategy CEO and BTC advocate, Michael Saylor, has allayed the fears of crypto investors, saying, “the happenings (in the crypto market) will be for its eventual good.”