The European Systemic Risk Board (ESRB) has deemed it a “matter of urgency” to consider the need for additional regulatory measures and policy steps to address the potential threat that crypto assets could pose to the financial system.
The body, which is responsible for ensuring the stability of the financial system in the EU, said in a statement on Thursday that while crypto assets currently have a limited hold on the financial system, “these risks could materialize quickly and suddenly.”
Crypto’s recent boom and bust has caused regulators to pay closer attention to the market. The digital assets market had a market capitalization of around $790 billion at the start of 2021 and then peaked at almost $3 trillion in November before plunging to $1 trillion as of June 30, according to CoinGecko. Recently, regulators have become more concerned about the risks that crypto poses because of the recent collapse of terraUSD (UST) and troubles faced by crypto lenders such as Celsius.
The ESRB also hopes to identify crypto’s possible systemic implications on the EU financial system, as well as consider potential legal actions and regularly monitor the digital asset sector.
The EU is not the only one looking into how to mitigate against risks posed by crypto assets. The U.K.’s Treasury published a consultation paper in May in which it said it planned to legislate that the Bank of England, its central bank, would have the power to supervise stablecoins that could impact the wider economy.
The ESRB said it planned to make proposals on how to ensure a European and global regulatory standard was developed to better safeguard against crypto assets that could one day be classified as systemic.
The EU is already in the process of producing a legislative package for crypto assets called Markets in Crypto Assets (MiCA) that would be transportable across all 27 nations. The EU has reaffirmed its “support for a quick adoption and implementation” of MiCA.
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