The Financial Stability Board (FSB) has finalized its recommendations for a global crypto framework. These guidelines have been recommended to the 20 leading economies of the world, known as the G20, with the aim of establishing a consistent regulatory approach to the crypto industry.
The FSB’s recommendations are based on the principle of “same activity, same risk, same regulation.” This means that crypto platforms will be required to segregate clients’ digital assets from their own funds and clearly separate functions to avoid any conflicts of interest. Regulators will also be responsible for ensuring tight cross-border cooperation and oversight.
The FSB is particularly focused on the regulation of stablecoins, which are cryptocurrencies pegged to a stable asset such as a fiat currency. These stablecoin issuers will be required to have one or more identifiable and responsible legal entities or individuals, referred to as a “governance body.” They must also hold reserve assets in a 1:1 minimal proportion, unless they are subject to strict prudential requirements equivalent to commercial bank standards.
In addition to these recommendations, the FSB is considering the potential obligation for global stablecoin issuers to obtain permits to operate in each separate jurisdiction. This would further ensure compliance with local regulations and enhance regulatory oversight.
The FSB’s recommendations also address privacy concerns, specifically in relation to decentralized finance (DeFi) protocols. Local regulators are urged to ensure that there is no activity that could frustrate the identification of responsible entities or affiliated entities, highlighting the FSB’s commitment to maintaining a balance between privacy and regulatory oversight.
It is worth noting that the FSB plans to review the implementation of its recommendations worldwide by the end of 2025. In September 2023, a joint report will be delivered by the FSB and the International Monetary Fund (IMF) on existing policies and regulatory issues to the G20. This demonstrates the FSB’s commitment to ongoing evaluation and collaboration in the development of a global crypto framework.
The FSB’s recommendations have already gained attention from industry stakeholders. The Association for Financial Markets in Europe (AFME) recently cited the FSB’s stance and urged European Union lawmakers to include decentralized finance (DeFi) in the EU’s crypto framework. This highlights the significance of the FSB’s recommendations in shaping the future of the crypto industry on a global scale.
the Financial Stability Board has finalized its recommendations for a global crypto framework. These recommendations focus on the regulation of crypto platforms, particularly stablecoin issuers. The FSB emphasizes the importance of segregating client assets, establishing governance bodies, and holding adequate reserve assets. The FSB is also considering the requirement for permits for global stablecoin operations in individual jurisdictions. The ongoing evaluation and collaboration demonstrated by the FSB showcase their dedication to creating a consistent and effective regulatory approach to the crypto industry.