Bitcoin, other digital assets, and crypto exchanges have come under unheard-of scrutiny in the wake of the collapse of one of the largest cryptocurrency exchanges, FTX.
The demand for tougher regulatory oversight has become increasingly loud over the last week with the amount of money believed to have been lost by FTX and its sister company Alameda Research reaching eye-popping heights and threatening to swallow the larger crypto market.
Following the most recent meeting of the Group of 20 (G20) industrialized nations in Indonesia, the leaders of the participating nations described the need for international regulations to control the rapidly expanding bitcoin and cryptocurrency space as “critical” and emphasized the need to reduce any risks to “financial stability.”
“It is critical to build public awareness of risks, to strengthen regulatory outcomes and to support a level playing field, while harnessing the benefits of innovation,” the G20 leaders, including American president Joe Biden, said in a statement that was published on the White House website, following their meeting this week in Bali, Indonesia.
The Financial Stability Board (FSB), a global organization that sets financial standards, put out regulations last month that would subject cryptocurrency businesses and markets to the same stringent regulations that apply to traditional finance.
“We welcome the FSB’s proposed approach for establishing a comprehensive international framework for the regulation of crypto-asset activities based on the principle of ‘same activity, same risk, same regulation,” the G20 leaders said.
The added that they want to “ensure that the crypto-assets ecosystem, including so-called [traditional currency-pegged] stablecoins, is closely monitored and subject to robust regulation, supervision, and oversight to mitigate potential risks to financial stability.”
The Bahamas-based FTX exchange lost up to $8 billion by lending customer deposits to Alameda Research, a trading firm that is also owned by former billionaire and founder Sam Bankman-Fried (SBF) according to reports.
The massive hole in FTX’s balance sheet has caused a flood of warnings from other cryptocurrency companies with FTX exposure, and they are now racing to disassociate themselves from the defunct exchange.
The collapse of FTX, according to U.S. Treasury Secretary Janet Yellen, “demonstrates the need for more effective oversight of cryptocurrency markets,” she added in a statement this week, adding that crypto assets should be protected similarly to traditional markets.