In a report, the FSB has said that traditional finance such as big banks and hedge funds are also getting involved in this. Due to this also the risk of financial stability can increase rapidly. The FSB has described the cryptocurrency as a threat. In May last year, when China cracked down on the crypto market, Bitcoin and Ether saw a sharp decline. These are the examples that raise doubts about the crypto market. John Cunliffe, deputy governor of the Bank of England, has also opposed the cryptocurrency.
Decentralized finance (DeFi), which is called a branch of crypto, is also corroborating the warnings of the FSB. This is because they allow users to lend, borrow and save in cryptocurrencies, bypassing institutions such as banks and exchanges. The popularity of DeFi has increased during the Kovid epidemic. Along with this, it has also become a channel for scams and other crimes. Because of this, new challenges are coming before the regulators.
The FSB report said that without regulation and market monitoring, DeFi and its associated platforms could pose a threat to financial stability. The president of the French securities watchdog AMF – Robert Opel – said last week that the FSB could soon have a global framework for cryptocurrencies. Although the countries involved are not obliged to follow the rules made by the FSB, but they have to express a commitment to make such rules.