- The Financial Stability Board (FSB) urges authorities to ensure crypto-asset issuers and service providers make adequate disclosures.
- It highlights the need for segregation of client funds and measures to prevent conflicts of interest.
- The watchdog also calls for globally coordinated rules for stablecoins.
The Financial Stability Board (FSB) said in its latest report on crypto assets that the sector needs improved disclosure practices by providers and stronger regulatory cooperation across jurisdictions.
Mandated by the G20 to develop a comprehensive framework for crypto regulation, the FSB released two related sets of recommendations. The first set addresses a global approach to regulating crypto-asset activities, including supervision and oversight of digital asset markets and service providers.
The second set focuses specifically on the regulation and oversight of global stablecoins.
“Our global regulatory framework for crypto-asset activities seeks to ensure that crypto assets and global stablecoins are subject to robust regulation and supervision and do not pose risks to financial stability,” the organisation said.
FSB recommendations emphasize disclosures and segregation of funds
In a press release published on July 17, the FSB highlighted both documents and noted that “the final recommendations draw on the implementation experiences of jurisdictions and build on the principles – ‘same activity, same risk, same regulation’; high-level and flexible; and technology neutral – that informed the consultative framework.”
The framework follows a turbulent period for the crypto sector dating back to mid-2022. The FSB strengthened its recommendations in response to major events such as the collapse of TerraUSD and the failure of the FTX exchange.
Consequently, the FSB places particular emphasis on safeguarding client assets, mitigating conflicts of interest, and enhancing cross-border cooperation among regulators.
Overall, the watchdog sets out nine core recommendations for a global framework governing crypto-asset activities and markets, and ten recommendations for the regulation and oversight of stablecoins. One central recommendation on crypto-asset activity regulation concerns disclosures. The FSB states:
“Authorities should require that crypto-asset issuers and service providers disclose to users and relevant stakeholders comprehensive, clear and transparent information regarding their governance framework, operations, risk profiles and financial conditions, as well as the products they provide and activities they conduct.”
The press release explains that the final recommendations reflect lessons learned from market events over the past year and incorporate feedback gathered during the public consultation phase.
Several jurisdictions, including the European Union and the United Kingdom, are already moving toward comprehensive regulatory frameworks for crypto-asset activities and stablecoins. The EU’s Markets in Crypto-Assets (MiCA) regulation is expected to come into effect in 2024, while the UK’s Financial Services and Markets Act received royal assent in June after parliamentary approval.
As previously reported, the UK intends to implement its crypto laws promptly, aiming to position the country as a competitive hub for digital-asset businesses.