Crypto Conglomerates Require 'Urgent Regulatory Attention,' European Watchdogs Say

European financial stability watchdogs on Thursday called for urgent action to regulate crypto conglomerates, as markets reel from the apparent collapse of major exchange FTX.

The message from the Financial Stability Board’s (FSB) European chapter is the latest signal that market turmoil will mean sweeping new rules for the sector, given its increasing sway over conventional financial markets.

“In light of recent developments, decentralized finance, trading platforms and so-called crypto conglomerates and exchanges that vertically integrate multiple functions deserve urgent regulatory attention,” the FSB Europe Group said in a statement after a regular meeting in Lisbon.

The group, chaired by officials from the Swedish central bank and U.K. Treasury and including financial authorities from France, Germany and the European Union, suggested it would take as a blueprint a recent FSB regulatory plan that could force conglomerates to break up and stablecoins to centralize governance.

Read more: ‘Comprehensive’ International Crypto Rules Proposed by Influential Finance Watchdog

The FSB was responsible for the slew of global regulations on the financial sector that followed the 2008 crisis. While officials have warned crypto can be risky for investors, they have generally downplayed the threat to the financial system as a whole, as turmoil in the crypto sector doesn’t usually spill over into the banking or insurance sector – but that could soon change.

Attendees were told of the “growing interlinkages between crypto-asset markets and the traditional financial system” ahead of their discussion, the statement said.

Revelations made by CoinDesk last week about FTX’s relation to the supposedly separate trading arm Alameda have led to a liquidity crisis, a now-abandoned rescue offer from rival exchange Binance and a promise to wind down Alameda, though CEO Sam Bankman-Fried has said the company remains solvent.