Financial Stability Board Publishes Global Regulatory Framework for Crypto Assets

The regulator believes that the growing link between traditional finance and cryptocurrencies could increase the level of risk in the wider financial market.

The Financial Stability Board, an international body that oversees and makes recommendations on the global financial system, has finalized a global regulatory framework for crypto asset activity and issued several "high-level" recommendations on cryptocurrency regulation, supervision and oversight. industries and markets.

The regulator said the framework and recommendations were developed based on feedback received during a public consultation and an in-depth review of events in the crypto industry over the past year.

According to the Financial Stability Board:

"Events of the past year have highlighted the inherent volatility and structural vulnerabilities of cryptoassets and associated participants."

In addition, high-profile industry failures such as FTX have demonstrated that when key service providers fail, there can be a domino effect that causes risk to spread rapidly throughout the ecosystem.

The FSB believes that the deepening links between traditional finance and cryptocurrencies may increase the level of risk in the wider financial market. In response to this potential threat, they recommend stricter regulation of the cryptocurrency industry

The FSB's framework aims to ensure that regulation related to cryptocurrencies and stablecoins is comprehensive and consistent across borders. It also aims to ensure that the rules do not stifle technological innovation in the industry.

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As part of its framework, the regulator issued two different sets of high-level recommendations. The first group includes new proposals, and the second group includes previous proposals on stablecoins that have been revised in light of recent events.

These recommendations focus primarily on addressing various risks to financial stability and establishing a baseline for regulators to build their own regimes.

The FSB said it had strengthened some of its previous recommendations to better address three key areas, protecting client assets, addressing risks posed by conflicts of interest and improving cross-border cooperation.

The nine top-level recommendations include guidance on governance, information disclosure, risk management, supervisory tools and institutions, and cross-border cooperation between supervisors.

The FSB also clarified that the recommendations do not apply to central bank digital currencies, which are essentially considered central bank liabilities in digital form.