Bitcoin BTC and cryptocurrencies have come under unprecedented scrutiny following the collapse of major crypto exchange FTX.
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Calls for tighter regulatory scrutiny have escalated into a cacophony over the past week as the amount of money believed to have been lost by FTX and its sister company Alameda Research reaches staggering levels and threatens to engulf the broader crypto market .
Now, after the recent Group of 20 (G20) developed countries meeting in Indonesia, the leaders of the participating countries called the need for international rules to regulate the fast-growing bitcoin and crypto space “critical” and said potential risks for it “financial stability” had to be mitigated.
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US President Joe Biden has previously urged government agencies to cooperate on crypto development. [+] Regulation, although urgency has increased since the collapse of crypto exchange FTX.
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“It is critical to raise public awareness of risk, strengthen regulatory outcomes and support a level playing field while reaping the benefits of innovation,” G20 leaders, including U.S. President Joe Biden, wrote in a statement sent to the White House website after the meeting this week in Bali, Indonesia.
Last month, the global financial standard-setter Financial Stability Board (FSB) proposed rules that would subject crypto companies and markets to the same strict rules that apply to traditional finance.
“We welcome the approach proposed by the FSB to create a comprehensive international framework for the regulation of crypto-asset activities based on the principle of ‘equal activity, equal risk, equal regulation,'” the G20 leaders said, adding adding that they wanted to “make sure”. the crypto assets ecosystem, including [traditional currency-pegged] Stablecoins, is closely monitored and subject to strict regulation, oversight and oversight to mitigate potential risks to financial stability.”
The Bahamas-based FTX exchange has reportedly lent customer deposits to Alameda Research, a trading firm also owned by former billionaire founder Sam Bankman-Fried (SBF), potentially losing as much as $8 billion.
The gaping hole in FTX’s balance sheet has prompted a wave of warnings from other crypto companies with FTX exposure, prompting them to distance themselves from the bankrupt exchange.
US Treasury Secretary Janet Yellen said FTX’s fall “shows[s] the need for more effective surveillance of cryptocurrency markets,” in a statement this week, adding that the same protections offered in traditional markets should apply to crypto assets.
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Bitcoin price has plummeted more than 70% since this time last year, pushing the crypto… [+] Industry into chaos and collapse of crypto exchange FTX and other crypto companies.
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“This is more of a wake-up call than just a bump or even the end of the road,” said Cristiano Bellavitis, a professor at Syracuse University specializing in cryptocurrency and blockchain technology, in emailed comments. “The sector is huge financially but has very limited regulation. The same problems would not have arisen in the mainstream financial system.”
However, Bellavitis expects the bitcoin and crypto industries to eventually recover from the FTX meltdown and predicts that regulation will help the technology thrive.
“[The collapse of FTX] will reduce trust in the crypto industry, but this industry and blockchain technology will remain,” said Bellavitis. “More regulation and clearer rules will only bolster what this industry can do.”