The Financial Stability Board (FSB), a global watchdog overseeing the financial system, has proposed a comprehensive regulatory framework for cryptocurrencies.
The guidelines have been recommended to the G20, the group of leading economies. The FSB’s approach is centered around the principle of “same activity, same risk, same regulation.”
A public note and two separate guideline documents released by the FSB present its general recommendations for regulating cryptocurrencies and global stablecoins. The latter refers to stablecoins that have cross-jurisdictional usage.Â
One key aspect the FSB highlights is the need for crypto platforms to segregate clients’ digital assets from their funds. This measure aims to prevent conflicts of interest and ensure client protection. Regulators are expected to enforce close cross-border cooperation and oversight.
The FSB also gives privacy due consideration. The organization insists that local regulators should prevent any activity that hampers the identification of responsible entities, including decentralized finance (DeFi) protocols.
The FSB appreciates the importance of privacy but emphasizes the need for accountability and accountable governance within the crypto space.
Regarding global stablecoins, the FSB stresses that issuers must have identifiable and responsible governance bodies. These issuers must maintain reserve assets in a minimal 1:1 proportion unless they are subject to prudential requirements equivalent to those imposed on commercial banks.
Notably, the FSB proposes that global stablecoin issuers may be obligated to obtain permits to operate in individual jurisdictions, adding an extra layer of regulatory oversight.
The FSB plans to review the implementation of its recommendations globally by the end of 2025. Additionally, in September 2023, a joint report on existing policies and regulatory challenges will be delivered to the G20 by the FSB and the International Monetary Fund.
The Association for Financial Markets in Europe, drawing inspiration from the FSB’s stance, has urged lawmakers in the European Union to include DeFi within the first EU-wide crypto framework.
Also Read: BIS Report Supports CBDC & Raises Concern For Crypto in G20
