Regulation of crypto markets is heading towards realisation. The International Organisation of Securities Commission (IOSCO) disclosed that the digital currency market is an area of focus. The IOSCO chair, Asley Alder, revealed that cyber security, operational resilience and transparency were risks that needed regulation.
The collapse in Luna and losses suffered by Tether, so-called stablecoins, have severely dented market confidence in these instruments. Moreover, their failure has given credence to regulator concerns regarding crypto disruption to financial stability.
What can be inferred from this week's volatility is that the integrity of stablecoin algorithms is questionable. Moreover, there is a worrying lack of transparency, i.e. Tether has not been completely forthcoming with details regarding the nature of its reserves. One would think that for a peg to be claimed, regulators would need to look carefully at the enforcement of fiat reserves or even real assets as a backing.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.