The Financial Stability Board (FSB) has finalized its recommendations for a global crypto framework, addressing the need for standardized regulation in the rapidly growing cryptocurrency industry. These guidelines, which were recommended to the G20 economies, aim to create a level playing field for crypto activities by adopting the principle of “same activity, same risk, same regulation.”
The FSB’s recommendations consist of two sets of guidelines: one for regulating crypto in general and another specifically for global stablecoins. The latter refers to stablecoins that are used across multiple jurisdictions. In order to ensure the safety of clients’ digital assets, the FSB advises crypto platforms to separate these assets from their own funds and clearly delineate their functions to avoid conflicts of interest.
The FSB also emphasizes the importance of cross-border cooperation and oversight among regulators. It recognizes the need to balance privacy concerns with regulatory requirements, particularly in decentralized finance (DeFi) protocols. The FSB urges local regulators to prevent any activities that may hinder the identification of responsible entities within DeFi protocols.
Regarding stablecoins, the FSB recommends that issuers establish a “governance body” comprising identifiable and responsible legal entities or individuals. It further suggests that stablecoin issuers hold reserve assets in a 1:1 minimal proportion, unless they are subject to prudential requirements equivalent to those imposed on commercial banks.
One notable addition in the guidelines is the potential requirement for global stablecoin issuers to obtain permits to operate in each jurisdiction they seek to operate in. This move aims to enhance regulatory oversight and ensure compliance with local regulations.
The FSB plans to review the implementation of its recommendations globally by the end of 2025. In collaboration with the International Monetary Fund (IMF), it intends to deliver a joint report on existing policies and regulatory issues related to crypto to the G20 economies by September 2023. The FSB’s recommendations have already garnered support from industry organizations such as the Association for Financial Markets in Europe (AFME), which has called for the inclusion of decentralized finance (DeFi) within the European Union’s crypto framework.
The FSB’s efforts towards establishing a global regulatory framework for crypto signify a significant step towards safeguarding the financial system and creating a more secure environment for crypto transactions worldwide. By adopting standardized regulations and ensuring compliance, the FSB aims to foster trust and stability in an industry that continues to experience rapid growth and innovation.
