Stablecoins on G7 hit list after Terra crash. Stringent laws incoming?

Sahana Kiran
Source – Unsplash

The crash of Terra and its native assets LUNA and UST instigated immense commotion in the market. With monetary loss taking the front stage, regulators had to barge in. Regulators from across the globe rushed in to address the situation and urge the community to be wary of their investments. In a similar move, finance ministers from seven different countries expressed their take on stablecoins during a recent G7 meeting.

Cryptocurrencies were extensively disregarded by lawmakers across the globe. Some even drew bizarre comparisons between the crypto assets. However, the increased adoption of these assets urged these authorities to warm up to the industry. Just when crypto-friendly laws began making a debut, Terra crashed and things went a full circle.

In a recent statement rolled out by G7, the need to impose stringent laws on stablecoins was highlighted. This was in the context of combating money laundering. The G7 urged the Financial Stability Board [FSB] to take a deeper look into the crypto market. The statement further read,

“In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB, in close coordination with international standard-setters, to advance the swift development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers, with a view to holding crypto-assets, including stablecoins, to the same standards as the rest of the financial system.”

G7 initiates rapid implementation of FATF’s travel rule

The Financial Action Task Force’s [FATF] travel rule was accepted back in 2019. This rule was quite contentious as it was dead against privacy coins. It even steered platforms away from the ethos of cryptocurrencies.

Terra’s crash seems to be pushing the G7 to implement the travel rule. The statement additionally said,

“In particular, the G7 calls for rapid implementation of the Financial Action Task Force (FATF) ‘travel rule’ and stronger disclosure and regulatory reporting, for instance, as regards reserve assets backing stablecoins.”

The G7 concluded by suggesting that it was committed to high regulatory standards for global stablecoins.