G20 Watchdog Report Highlights Crypto Firms' Nowhere-to-Hide Situation Under Global Rules
Amid a heightened call for comprehensive digital assets legislation, the G20's Financial Stability Board (FSB), on July 17, published its final recommendations for regulating crypto trading firms. It focuses on issues relating to regulatory supervisory and oversight of crypto assets to help foster innovation.
The regulator also revised its existing recommendations for stablecoins in light of the catastrophic collapse of TerraUSD/Luna stablecoins.
The FSB noted that with globally agreed rules, crypto firms would have no choice but to introduce basic measures to avoid similar mayhems like the FTX collapse.
According to the watchdog, the 2022 Terra and FTX collapse underscored inherent volatility and structural vulnerabilities of cryptocurrencies and related players.
FSB also emphasized that last year's events show that the failure of a critical crypto service provider can transmit ripple effects across the entire ecosystem. The FSB fears that crypto-engineered risks may spill over to the traditional finance ecosystem causing financial instability.
“As recent events have illustrated, if linkages to traditional finance were to grow further, spillovers from crypto assets markets into the broader financial system could increase,” said the FSB.
The watchdog’s recommendations borrow universal safeguards from traditional finance to govern crypto before the sector expands large enough to pose financial instability-related threats.
The recommendations focus on three key areas: securing customers' assets, addressing risks related to conflicts of interest, and enforcing cross-border cooperation.
Its implementation would be jurisdiction-wise since every jurisdiction has a peculiar experience enforcing digital assets regulations.
The board
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