G20’s FSB Calls for Global Crypto Regulations To Iron-Out Issues

On July 17, the G20’s Financial Stability Board (FSB) unveiled proposed guidelines for a global regulatory framework for the crypto industry. The international agency urged the world nations to set up and address the risk faced by traditional finance with cryptocurrencies. It also said that events like the FTX-saga have emphasized the need for a global regulatory framework.

FSB Calls for Global Crypto Regulations

As per the newly published 17-page report, the FSB wishes to have a tighter rein over the digital asset industry by incorporating stricter regulations and standardized frameworks which empower this global regulatory framework. FSB called for collaboration between jurisdictional financial authorities and different standard-setting bodies (SSBs).

The proposed cooperation wishes to guarantee that sturdy regulations should govern digital asset activities. It also expects to facilitate an oversight that would analyze the financial stability risk the industry carries along with helping the forthcoming innovation in the sector.

In its study, the FSB has identified noticeable failures and collapses in the industry like the FTX-saga, Terra Ecosystem Collapse, 3AC, etc. A closer examination of these events reveals the interlinkage between the digital asset markets and traditional financial systems. The report says that even though the impact was limited in the conventional financial system, it was noticeable.

Avoiding Spillovers

The FSB report argues that the interlinkage between these two industries could cause the risks to spill over and affect the other. Moreover, many digital assets have high exposure to economic functionality. For instance, exchanges require banks to facilitate fund transfers. Comprehensive regulations should be implemented to prevent centralized finance from being affected by decentralized finance.

The nine recommendations in the list mandate that any crypto activity similar to the conventional financial system must be subjected to identical or equivalent regulations. Moreover, this system must hold regardless of the promotion or activity of the digital asset.

G20’s agency feels that the recommendations provided in the report should be sufficient for the SSBs to make detailed structures robust enough to tackle the industry’s issues in their specific jurisdictions.

The primary purpose says the FSB is to “safeguard client assets” and remove “conflict of interest” from the industry, along with the establishment of “cross-border cooperation.” The FSB and the International Monetary Fund (IMF) will present a detailed joint report on the matter in September 2023. The upcoming report would then be a blueprint for global crypto regulations.

IOSCO Also Working on Global Regulations for Digital Assets

The International Organization for Securities Commission (IOSCO), in May 2023, proposed 18 measures for global regulations of digital assets. The proposed rules revolve around six key ideas, which, if worked on properly, could resolve the underlying problems.

These areas shall include regulatory cooperation and cross-border risks. Handling the conflict of interest, address of market manipulation, insider trading, and fraud, protection of client’s digital assets, managing operational and technological risks, providing retail access, suitability, and distribution.

Cryptocurrency emerged as a global phenomenon, and though it provides various benefits, some underlying risks are hard to ignore. Even if significant jurisdictions might someday have their own set of regulations, there is still a need for a global regulatory framework surrounding digital assets.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing