FILE PHOTO: A representation of cryptocurrency Bitcoin is placed on a PC motherboard, in this illustration taken June 16, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
LONDON: Globally agreed rules leave crypto firms with no option but to introduce basic safeguards to prevent the blow-ups seen at FTX exchange and other crypto casualties, the G20’s Financial Stability Board (FSB) says.
The FSB published yesterday final recommendations requested by the G20 on supervising firms that trade crypto assets such as bitcoin.
The watchdog also revised its existing recommendations for stablecoins in light of the demise of TerraUSD and luna coins.
Both borrow universal guard rails from mainstream finance before the sector grows big enough to pose a threat to financial stability by focusing on robust governance to avoid conflicts of interest, and proper risk management and disclosures to ensure that customer money is segregated from company cash.
“As recent events have illustrated, if linkages to traditional finance were to grow further, spillovers from crypto asset markets into the broader financial system could increase,” the FSB said.
The collapse of FTX in November 2022 highlighted vulnerabilities from crypto firms and the FSB said that all countries should apply the recommendations, even those that are not members of the watchdog. FTX was based in the Bahamas, not an FSB member.
“Therefore, crypto asset players need to stop operating outside the regulatory perimeter or in non-compliance with existing rules,” FSB secretary general John Schindler told reporters.
“These players can no longer argue there is a lack of regulatory clarity, as our framework makes clear the standards that should apply.” Schindler said.
Bitcoin has reached 13-month highs as the sector recovers from last year’s rout, bolstered by a landmark legal victory for Ripple Labs Inc last Thursday, which had challenged regulators over how far tokens should come under US securities law.
The European Union has already approved the world’s first comprehensive set of rules for crypto asset markets, but the FSB’s “global baseline” minimum standards are designed to accommodate jurisdictions that want to go further.
The FSB norms are expected to be made more granular by additional measures from global banking and securities watchdogs Basel Committee and IOSCO.
IOSCO proposed in May the first global approach to regulating crypto market day-to-day operations. The FSB, whose members commit to applying agreed norms, will review how they are put into place by the end of 2025. — Reuters
