Golden Observation | UST crash triggers supervision, many countries emphasize strengthening supervision of DeFi and encryption

Since UST, the largest algorithmic stablecoin, was severely de-anchored on May 10, and LUNA collapsed into a death spiral, the entire encryption market was driven downwards, the overall market was unstable, and the chain reaction also attracted the attention of regulators from various countries.

As of press time on May 17, according to incomplete statistics, within 7 days, many regulatory agencies including the United States, Germany, South Korea, Spain, the United Kingdom, the European Union, and the International Securities Regulatory Commission have expressed their intention to strengthen the supervision of the DeFi and encryption markets. related regulatory measures.

On May 10, the Federal Reserve released the "Financial Stability Report" and emphasized the risk of running on stablecoins. Certain types of money market funds (MMFs) and stablecoins remain prone to runs, and domestic banks have low capital risk, but structural vulnerabilities remain in some money market funds, bond funds and stablecoins, the report wrote. Back in January, Fed researchers published a study on the risks and benefits of stablecoins, reporting that the Financial Stability Oversight Board may step in to oversee stablecoins if Congress does not enact new laws targeting the industry.

At a meeting on Capitol Hill on May 10, U.S. Treasury Secretary Yellen talked about the regulation of U.S. dollar stablecoins in the encryption market. Yellen believes that the legislation of U.S. dollar stablecoin regulation is imminent. Risks, as we all know, Terra UST experienced a round of decline today.

On May 11, at the Financial Markets Conference hosted by the Federal Reserve Bank of Atlanta, Nellie Liang, Under Secretary of the US Treasury for Domestic Financial Affairs and leader of the report of the US President's Financial Markets Working Group (PWG), said that even now there is basically no prudential Regulated stablecoins must also comply with national-level Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) requirements.

On May 12, U.S. Treasury Secretary Yellen once again pointed out that Terra is a real example of the risk of stablecoins. The Ministry of Finance is stepping up efforts to develop a stablecoin risk report. Yellen reiterated the need for a comprehensive framework for stablecoins.

On May 12, according to a document, the European Commission is considering strict restrictions on the ability of stablecoins to replace the widespread use of fiat currencies. The EU finance minister proposed tough measures aimed at preventing the stable currency from replacing the euro, and asked that if the daily transaction volume exceeds 1 million or the transaction amount exceeds 200 million euros, the issuance will be stopped. The document was marked "non-paper," meaning it did not reflect the committee's official position. EU lawmakers and governments are trying to finalize a landmark cryptocurrency law known as Market Regulation in Cryptoassets (MiCA), with the committee set to hold closed-door negotiations at a later stage.

On May 13, according to CNBC reporter Ryan Browne, the British government is preparing to take further action on stablecoins after the collapse of UST. Common feature. The government is planning to bring stablecoins under the purview of electronic payment regulation, meaning issuers like Tether and Circle could be regulated by the U.K.’s Financial Conduct Authority (FCA).

In addition, the Korean Financial Commission and the Financial Supervisory Service recently asked domestic cryptocurrency exchanges to understand the current situation of Luna-related trading volume and closing price, the number of investors holding Luna and Terra, the number of people by amount, and investments exceeding 1 million won number of people. In addition, data on domestic cryptocurrency exchanges' countermeasures and measures against the Luna incident, as well as the reason for the decline judged by the exchange, were also requested.

The financial world is focused on cryptocurrencies as the stablecoin terraUSD (UST) crashes and markets crash. Bitcoin was trading at a 16-month low early Thursday. Ashley Alder, chairman of the International Securities Commission (IOSCO), the association of market regulators, said that a joint body responsible for coordinating global cryptocurrency regulation is urgently needed and could become a reality within the next year. Alder said there is clearly a need for a global organization aimed at harmonizing encryption rules. Currently, there is nothing like it in the cryptocurrency space. That could change around the same time next year.

Ashley Alder also noted that the growth of the digital currency market and its growing connection to mainstream finance has made encryption a top area of focus for regulators around the world. Ashley Alder said: “Crypto is clearly on the agenda, and crypto is now one of the three ‘C’s that represent areas of greatest concern to regulators, alongside COVID-19 and climate change.”

Additionally, on May 13, SEC Chairman Gary Gensler re-emphasized his statement that crypto assets are securities and should be regulated. The policymaker went on to make claims for the crypto asset industry against the agency responsible for overseeing U.S. securities. Gensler is seeking full control over the regulation of the crypto industry, which could impose severe restrictions on companies and investors in the country. He claimed that very few cryptoassets behave like commodities or digital gold, which is why institutions should have jurisdiction over them.

On May 14, Pablo Hernández de Cos, governor of the Bank of Spain and chairman of the Basel Committee on Banking Supervision, explained that the cryptocurrency space and decentralized finance (defi) need to be quickly regulated to avoid the risk of financial instability. Hernandez de Cos also mentioned how this quick approach should bring the crypto-financial system under regulation before it gets bigger. “Despite this astounding growth, crypto assets still only account for around 1% of total global financial assets, and banks have had relatively limited direct exposure to date,” he said. However, we know that these markets have the potential to expand rapidly and pose risks to individual banks and overall financial stability. Furthermore, he suggested an "aggressive and forward-looking regulatory approach" to the topic, declaring that a balance could be struck between welcoming these technologies and mitigating their risks.

Central Africa’s banking regulator reminded member states of its ban on cryptocurrencies on May 14. The Central African Banking Commission, which oversees the banking sector in the six Central African economies and monetary communities, said its ban was aimed at ensuring financial stability. The reminder from the Central African region's banking regulator of its ban on cryptocurrencies comes just weeks after member state Central African Republic adopted bitcoin as legal tender. The announcement came as cryptocurrencies posted massive losses on Friday after the collapse of the so-called stablecoin TerraUSD engulfed the market.

According to news on May 16, Gensler, chairman of the US Securities and Exchange Commission, said that the US Securities and Exchange Commission and the US Commodity Futures Trading Commission plan to jointly supervise some tokens.

On May 17, Germany’s financial watchdog said DeFi needs to comply with new regulations, citing the risk of hacking and fraud. Birgit Rodolphe, an anti-money laundering officer at the German financial regulator BaFin, said, "If DeFi is to become a real competitor to traditional financial markets, it will not work without specific new regulations." “Ideally, of course, these regulations would be consistent across the EU to prevent market fragmentation and increase Europe’s collective innovation potential, including DeFi applications, as well as insurance, lending and securities,” she added.

On May 17, Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), said that cryptocurrency assets are highly speculative and their investors need more protection, otherwise they may lose trust in the market. Gensler said that while the crypto market is considered decentralized, the reality is that most activity takes place on a handful of trading platforms, which, along with token issuers, need to work with the SEC to improve industry rules and regulations. information disclosure. He pointed to fundamental market principles such as "anti-fraud, anti-manipulation, making sure there's no front-running, making sure orders are real and not fictional." Additionally, Gensler said, the SEC will continue to act as "the police on call." , while working with the Commodity Futures Trading Commission to ensure that all cryptocurrencies are covered.