The G20 has asked the FSB to coordinate the delivery of an effective regulatory, supervisory, and oversight framework for crypto-assets by July 2023, including the completion of the FSB’s high-level recommendations for the supervision and regulation of crypto-asset activities and so-called global stablecoins (GSCs).
To improve the comprehensiveness and international uniformity of regulatory and supervisory methods, the Financial Stability Board (FSB) has finalised Global regulatory framework for crypto-asset operations.
Frameworks provides recommendations on Global regulation as well as supervision. Framework also provides oversight on crypto-asset activities and global stablecoin arrangements.
According to FSB, spillovers from crypto-asset markets into the larger financial system might expand if links to traditional finance strengthen further. Since early 2022, the crypto-asset market has been in chaos. A rapid drop in crypto-asset prices in May 2022 highlighted that the intrinsic volatility of crypto-asset markets can lead to unexpected market stresses and collapses of crypto-asset intermediaries.
The collapse of the TerraUSD/LUNA coins, as well as the de-pegging of other so-called stablecoins, showed the ineffectiveness of its stabilising methods. The crypto-asset market was jolted during November 2022, when FTX, one of the major crypto-asset trading platforms declared bankruptcy.
The G20 has asked the FSB to coordinate the delivery of an effective regulatory, supervisory, and oversight framework for crypto-assets by July 2023, including the completion of the FSB’s high-level recommendations for the supervision and regulation of crypto-asset activities and so-called global stablecoins (GSCs).
The establishment of laws and requirements, as well as the application and enforcement of existing requirements, are compatible with the FSB’s framework and illustrate that crypto-asset operations do not take place in a regulatory-free zone. Crypto-asset service providers may not begin operations in any jurisdiction unless they fulfil all applicable regulatory requirements.
The FSB guidelines aim to ensure that global stablecoin and crypto-asset operations are subject to regulatory frameworks that are proportionate to the risks they may represent to financial stability.
The FSB proposals are high-level and provide jurisdictional authorities enough flexibility to execute them by applying applicable rules or developing new domestic regulatory frameworks.
The FSB guidelines are intended to be address challenges arising from various technologies and will be used to address financial stability issues connected with global stablecoin and crypto-asset activity.
In September 2023, the FSB and the IMF will produce a combined report to the G20 that will synthesise policy conclusions from IMF work on macroeconomic and monetary issues and FSB work on supervisory and regulatory issues.
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