FSB Proposes Tougher Policies Globally for Crypto Operators
- The FSB called for collaboration between different regulators globally.
- The FSB warned that a lack of strict policies governing the crypto industry could have serious financial consequences.
- The new policies urged crypto service platforms to separate their funds from customer assets to prevent a conflict of interest.
The Financial Stability Board (FSB), which oversees the world’s financial system, has developed a global regulatory framework for cryptocurrencies. The FSB says its new policy, which was published for the first time on Monday, considered key events such as the Terra and FTX collapse and proposed stricter regulations for the crypto industry. The G20 watchdog warned of huge global consequences if the industry remained unregulated.
The FSB’s documents read that “the events of the past year have highlighted the intrinsic volatility and structural vulnerabilities of crypto-assets and related players.” It added that recent events in the industry have “illustrated that the failure of a key service provider in the crypto-asset ecosystem can quickly transmit risks to other parts of that ecosystem.”
The FSB’s new framework is centered on the principle of “same activity, same risk, same regulation,” which seeks to level the playing field in terms of regulation by requiring that different forms of an activity, such as payments, conform to the same regulations.
The FSB Recommends New Policies for Crypto Platforms
The FSB updated its policies on the regulation of stablecoins and provided nine high-level recommendations for regulators on how to monitor cryptocurrency firms and markets. The proposal could see crypto companies segregate some of their activities.
The new rules would require crypto platforms to differentiate their functions and keep clients’ digital assets separate from their finances to avoid conflicts of interest. The FSB further stated that as ties between the crypto industry and traditional finance grow, the possibilities of “spillovers” from the crypto space will increase.
The FSB’s proposals also call for cross-border collaboration between authorities, and mandatory disclosures for the sector. A part of the recommendations noted that “authorities should have access to the data as necessary and appropriate to fulfill their regulatory, supervisory, and oversight mandates.”
In addition, the FSB also highlighted its regard for privacy, urging local regulators to ensure that no conduct could “frustrate the identification of the responsible entity or affiliated entities,” using decentralized finance (DeFi) platforms as an example.
The FSB noted that it will evaluate how well its suggestions have been implemented globally by the end of 2025. The global watchdog will also present a joint report to the G20 in September 2023, along with the International Monetary Fund (IMF), on the current regulatory challenges.
Regulators around the world are approaching the regulation of cryptocurrency from various angles. The U.S. Securities and Exchange Commission (SEC) is attempting to apply policies created for traditional financial products to the crypto space, while the European Union recently approved the Markets in Crypto Assets (MiCA) regulation. The UK recently recognized crypto trading as a financial activity. All of these policies point to the growing recognition of the crypto industry.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
