July 20, 2023
By Sharan Kaur Phillora
The G20 Financial Stability Board (FSB) announced a regulatory framework for cryptocurrency activities on Monday, prompted by last year’s significant crypto market fluctuations. It issued nine key recommendations for regulators to enhance the oversight of crypto companies and markets. This move highlights the global effort to mitigate financial risks associated with the increasingly popular crypto industry.
Here’s what we know:
The FSB’s framework emphasizes the principles of “same activity, same risk, same regulation,” aiming for a balanced approach across different forms of financial activities, such as payments. This standardized protocol is a crucial measure in stabilizing the potentially volatile crypto environment and ensuring its alignment with traditional financial practices.
The recommendations include enhancing cross-border regulatory collaboration, enforcing governance requirements for cryptocurrency issuers, and mandating industry disclosures. This approach responds to the wider financial threats identified following recent crypto market upheavals, notably involving companies like FTX and Terra.
The Swiss-based FSB has also proposed more robust protections for client assets and strategies to manage potential conflicts of interest. Its focus on these safeguards indicates a growing concern about the risk of contagion if a key service provider in the crypto ecosystem fails.
Notably, Monsur Hussain, the Head of Financial Institutions Research at Fitch Ratings, commented that the FSB’s move was about ensuring stability and protecting stakeholders, not merely legitimizing the crypto industry.
In response to the announcement, Konstantin Horejsi, Chief Product Officer at Blocktrade, expressed his approval, stating that the crypto community wasn’t seeking preferential treatment but rather similar regulatory boundaries to comparable asset classes. He added that while implementing the guidelines would vary, they laid a strong foundation for quicker regulatory action.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.