In response to current volatility in the cryptocurrency market, the Basel, Switzerland-based Financial Stability Board today called for “an effective regulatory framework” to ensure that crypto activities that pose similar risks to traditional financial activities are “subject to the same regulatory outcomes, while taking account of novel features of crypto assets and harnessing potential benefits of the technology behind them.”
The board’s statement had four main takeaways: Crypto-assets and markets must be subject to effective regulation and oversight equal to the risks they pose domestically and internationally; cryptocurrency service providers must ensure compliance with existing legal obligations in the jurisdictions in which they operate; crypto market turmoil highlights the importance of ongoing work by the FSB and international standard-setting bodies to address the potential financial stability risks posed by crypto assets; and stablecoins should be subject to “robust” regulations and supervision of relevant authorities if they are to be adopted as a widely used means of payment or play an important role in the financial system.
FSB said member authorities will implement applicable international standards into national regulatory and supervisory frameworks “to the extent not already reflected and will adopt guidance, recommendations and best practices of international standard-setting bodies, as appropriate.” The board will report to G20 Finance Ministers and Central Bank Governors in October on regulatory and supervisory approaches to stablecoins and other crypto assets.
Earlier this year, the FSB published a report warning that crypto-asset markets are evolving quickly and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.
