China’s central bank urges global cryptocurrency supervision for safer financial regulation
The post China’s central bank calls for global cryptocurrency supervision for safe financial regulation appeared first on Coinpedia
The People’s Bank of China (PBC) doubled down on its focus on cryptocurrency assets in its recently released 2023 Financial Stability Report. The report highlights the exponential growth of the global cryptocurrency market and the need for consistent oversight while reflecting the “same business” principle. , same risk, same supervision” to bridge regulatory gaps and prevent fragmented supervision.
Cryptocurrency Supervision: PBC Urges Global Cooperation
PBC’s report calls for international cooperation on cryptocurrency asset regulation, emphasizing the need for a unified global approach to oversee this fast-growing sector. France’s acknowledgment of the risks of cryptocurrency assets has further strengthened calls for stronger international coordination on regulatory issues.
However, the report raises concerns about insider control, asset concealment, and off-chain data security related to crypto assets. Despite their low integration with traditional financial systems, the increasing volatility and speculative nature of these assets has raised alarms from 2022 onwards.
Steps to protect the Defi ecosystem
The report presents six comprehensive strategies to address these issues, covering access, internal controls, operational aspects, governance, exit strategies and enhanced oversight. It scrutinizes the governance models adopted by decentralized finance (DeFi) and warns of potential global financial threats posed by transparent cross-border transactions.
Although cryptocurrency assets account for just 1% of the global financial system, the report highlights the urgent need for regulatory restructuring and market reform. It advocates overhauling the registration system, which empowers regulators to manage market risk through a coordinated “negative feedback” mechanism.
Strict stance on regulation
The PBC report identifies risks to cryptocurrency assets, citing recent events such as the FTX collapse and fraudulent activity in the DeFi space. It emphasizes the need for preemptive measures against maturity mismatch, excessive leverage, and procyclical risks. Recognizing the vulnerability of cryptocurrency assets to cyber threats, the report highlights the need for a collaborative international framework to effectively manage their unique cross-border characteristics and address potential security vulnerabilities.
Overall, PBC’s comprehensive report reflects its rigorous stance on regulating cryptocurrency assets, prioritizing international cooperation, and a reimagined regulatory framework to mitigate risk and protect the global financial ecosystem.
