Given its recent instability and “growing interconnection with the traditional financial system,” the FSB appears to be more worried about the crypto market.
All G20 nations are represented on the Financial Stability Board (FSB), a global financial regulator, which is getting ready to suggest worldwide rules for crypto and stablecoins in October.
The FSB announced a significant effort to regulate cryptocurrency in a statement it released on Monday on the international regulation and oversight of the crypto-asset activity.
In October 2022, the watchdog intends to present a report on regulatory and supervisory approaches to stablecoins and other crypto assets to the G20 finance minister and central bank governors. By then, the Financial Stability Board (FSB) plans to release a report on the public consultation regarding the assessment of proposals, which will include information on “how existing frameworks may be extended to bridge gaps and execute the high-level recommendations.”
Another public consultation paper with recommendations for improving global consistency in regulatory and supervisory approaches to other crypto-assets is also something the G20 authority intends to present.
“These combined efforts of the FSB and the international standard setting bodies are aimed at minimizing the risk of fragmentation and regulatory arbitrage,” the FSB noted.
The statement claims that the current downturn in cryptocurrency markets is what has the FSB’s interest in crypto regulations growing. The issue of cryptocurrency’s “growing interconnection with the traditional financial system” has been brought to light by the market turbulence, according to the regulator.
“It may have spill-over effects on important parts of traditional finance such as short-term funding markets,” the FSB stated, adding that global regulators need to supervise crypto markets in line with the principle of “same activity, same risk, same regulation.”
As a result, a stablecoin that joins the financial system’s mainstream must adhere to “strong regulatory and transparency norms, retain at all times the reserves that sustain the stability of value, and meet applicable international criteria,” the FSB said.
Some business executives believe that the FSB’s proposal of guidelines for a single, global stablecoin legislation is a difficult challenge.
The CEO of cryptocurrency data company CoinStats, Narek Gevorgyan, emphasized that while the FSB does not have legislative authority, it does pledge to integrate digital assets into the member countries’ current legal systems. questioned the regulator’s capacity to accept all regulatory approaches and protocols in a letter to Gevorgyan, writing:
“Existing legal frameworks can help regulate the speculative aspects of the market and centralized exchanges, but how does the FSB plan to integrate the hundreds of existing and newly emerging protocols that are radically resistant to regulation by design?”
In February of this year, the FSB already listed a number of hazards related to the bitcoin industry. The authority was particularly worried about the potential failure of some stablecoins, the problem of data gaps in the cryptocurrency business, and the possibly dangerous results of the quickly expanding decentralized finance industry.