The FSB published on Monday final recommendations requested by the G20 on supervising firms that trade cryptoassets such as bitcoin. The watchdog also revised its existing recommendations for stablecoins in light of the demise of TerraUSD/Luna coins.
The collapse of FTX in November 2022 highlighted vulnerabilities from crypto firms and the FSB said that all countries should apply the recommendations, even those that are not members of the watchdog. FTX was based in the Bahamas, not an FSB member.
The FSB published on Monday final recommendations requested by the G20 on supervising firms that trade cryptoassets such as bitcoin. The watchdog also revised its existing recommendations for stablecoins in light of the demise of TerraUSD/Luna coins.
Both borrow universal guard rails from mainstream finance before the sector grows big enough to pose a threat to financial stability by focusing on robust governance to avoid conflicts of interest, and proper risk management and disclosures to ensure that customer money is segregated from company cash.
The European Union has already approved the world’s first comprehensive set of rules for cryptoasset markets, but the FSB’s ‘global baseline’ minimum standards are designed to accommodate jurisdictions that want to go further.
The recommendations focus on addressing risks to financial stability and do not comprehensively cover all specific risk categories related to crypto-asset activities. Central Bank Digital Currencies (CBDCs), envisaged as digitalised central bank liabilities, are not subject to these recommendations.
Bitcoin has reached 13-month highs as the sector recovers from last year’s rout, bolstered by a landmark legal victory for Ripple Labs Inc on Thursday, which had challenged regulators over how far tokens should come under U.S. securities law.
Amid a heightened call for comprehensive digital assets legislation, the G20’s Financial Stability Board (FSB), on July 17, published its final recommendations for regulating crypto trading firms. It focuses on issues relating to regulatory supervisory and oversight of crypto assets to help foster innovation.
FSB also emphasized that last year’s events show that the failure of a critical crypto service provider can transmit ripple effects across the entire ecosystem. The FSB fears that crypto-engineered risks may spill over to the traditional finance ecosystem causing financial instability.
Both borrow universal guard rails from mainstream finance before the sector grows big enough to pose a threat to financial stability by focusing on robust governance to avoid conflicts of interest, and proper risk management and disclosures to ensure that customer money is segregated from company cash.
The European Union has already approved the world’s first comprehensive set of rules for crypto asset markets, but the FSB’s “global baseline” minimum standards are designed to accommodate jurisdictions that want to go further.