The recent fall in cryptocurrencies, especially the TerraUSD (UST) stablecoin scandal, has caught the attention of the entire world. In addition to the topic of stablecoins being debated at the US Congress, it will now be the G7’s turn to address the topic during a meeting to be held this week in Germany. Such a meeting will bring together both Finance Ministers and Central Bank governors from the US, Canada, France, Germany, Italy, the UK and Japan. Such information was also shared by Reuters, which cites the speech of Francois Villeroy de Galhau, head of the European Central Bank (ECB) and governor of the Central Bank of France.
“What has happened in the recent past is a wake-up call to the urgent need for global regulation.”
Therefore, this could be yet another initiative to regulate the cryptocurrency market globally. The same was suggested by other lawmakers this week, showing the growing interest in the topic.
G7 meeting will address cryptocurrencies
According to Francois Villeroy de Galhau, head of the European Central Bank (ECB), cryptocurrencies are on the radar of discussions at the G7, a group that brings together the seven most industrialized countries in the world.
“Europe led the way with MiCA (Markets in Crypto-Assets), probably […] We will discuss these issues among many others at the G7 meeting in Germany this week.”
Likely using recent events from TerraUSD (UST) as a basis, Galhau also pointed out that stablecoins are not as stable as their name suggests. After all, the UST dropped from US$1 to US$0.10 in just a few days.
“In addition to this public fragmentation — or geopolitics — there is a risk of “private” fragmentation through the disorderly development of crypto-assets, including “stablecoins”, whose name is wrong.”
“As demonstrated by the turmoil in the financial markets in recent weeks, they are possibly very unstable,” declared Francois Villeroy de Galhau, head of the ECB. “[…] this should be seen as a powerful wake-up call to urgently needed global regulation.”
Therefore, the head of the ECB believes that local regulations are useless. After all, such companies and entrepreneurs behind certain stablecoins may operate in other jurisdictions, where there are no laws on the subject. His full speech can be found on the website of the Central Bank of France.
End of stablecoins?
Due to the fear caused by the loss of the dollar peg of algorithmic stablecoins, even asset-backed stablecoins (bonds, cash, etc.) are losing market capitalization in recent days. The biggest one, Tether (USDT), has lost around US$8 billion (R$40 billion) in just the last seven days. Furthermore, the regulatory focus on stablecoins could also be behind this capital flight.
Tether (USDT) market capitalization drop in the last 7 days. Source: CoinMarketCap Apparently, such regulations should be based on the current rules issued to banks. Therefore, anti-money laundering, KYC and asset auditing practices are expected to be among the proposals. So while it’s not the end of stablecoins, this package could slow down their pace of adoption.
