G20 body issues 9 regulatory recommendations to curb the crypto industry

[ad_1]

The fallout from the crypto meltdowns of the past few years could lead to tougher global scrutiny of the industry, as a G20 watchdog has warned of wider financial risk if crypto businesses go unregulated.

The Financial Stability Board (FSB) said its global regulatory framework for crypto-asset activities, first published on Monday, was influenced by crypto crashes in recent years, alluding to FTX and Terra.

As part of an effort to combat these risks, the FSB has issued nine high-level recommendations for regulators on how to oversee crypto businesses and markets, as well as revising its recommendations on stablecoin oversight.

The recommendations, which also take into account feedback received during the FSB’s public consultation on the subject, include calls for cross-border cooperation between regulators, governance requirements for crypto issuers, and mandatory disclosures for the industry.

The FSB said it had strengthened several of its suggestions in light of recent events, including a push to ensure adequate protection of client assets and management of risks associated with conflicts of interest.

Events over the past year have highlighted the inherent volatility and structural vulnerabilities of crypto-assets and associated players, the Swiss-based body said in a press release. They also illustrated that the failure of a key service provider in the crypto-asset ecosystem can quickly transmit risk to other parts of that ecosystem.

The FSB added that the fallout from crypto crises on traditional finance could grow as ties between the two industries grow.

The framework is based on the principle of “same activity, same risk, same regulation”, a principle which is supposed to ensure a level playing field by enforcing the same rules by different forms of the same activity, for example payments.

“The FSB took the view that crypto markets need additional regulation to protect stakeholders and financial stability, rather than the view that crypto regulation confers legitimacy,” commented Monsur Hussain, Chief Financial Officer. research on financial institutions at Fitch Ratings.

Konstantin Horejsi, chief product officer of digital asset trading platform Blocktrade, welcomed the guidelines.

The crypto community as a whole has never asked for special regulatory treatment, but simply asked for the establishment of limits similar to those that already exist for comparable asset classes, he said.

He added that the FSB’s recommendations would provide a good basis, but much would depend on how they were implemented.

I’d bet the actual implementation of these guidelines will still vary widely, but at least now that the foundations are on the table, regulators will likely respond to the challenges before them a bit quicker, he said. Europe having shown the example with MiCA, I think that other economic blocks will follow soon.

[ad_2]