G20 Body Issues 9 Recommendations For Crypto Industry Regulation

G20 Body Issues 9 Recommendations For Crypto Industry Regulation

A warning from a G20 watchdog made it clear that regulating crypto companies was a must to avoid wider financial risk.

Failure to ensure tough global oversight of the crypto industry could lead to bigger meltdowns than the ones seen last year.

The recommendations

On Monday, the Financial Stability Board (FSB), for the first time, published a framework for global regulation of crypto activities

It also stated that the crypto crashes that had occurred in the industry last year, such as that of Terra and FTX, had influenced the said regulatory framework.

In order to deal with the risks that had become apparent, a total of 9 recommendations were issued by the FSB to regulators for supervising crypto markets and companies.

In addition, they also made revisions to the recommendations that were made for overseeing stablecoins.

A public consultation had also been conducted by the FSB on the topic of crypto regulation and the feedback it had received had also been included in the recommendations.

The recommendations include mandatory disclosures that need to be made, cooperation between cross-border regulators via calls, and governance requirements to be fulfilled by crypto issuers.

Recent events

According to the FSB, recent events had prompted it to strengthen a number of its suggestions, which include ensuring that client assets are safeguarded adequately and conflict of interest risks are addressed.

In a press release, the Swiss-based body said that the structural vulnerabilities and inherent volatility of crypto tokens and market players had been brought to light via the events that took place last year.

The events also highlighted that if a key service provider part of the overall crypto ecosystem fails, then the risks can also spread to other parts of the said ecosystem.

As per the FSB, as the links between traditional finance and the crypto industry grow, the crises from the former could spill over to the other.

More details

Therefore, the FSB has come up with a framework that follows the principle of the same activity, risk, and regulation, which can create a standard regulatory field.

It will be able to accomplish this by implementing the same rules for different types of same activities, such as payments.

Fitch Rating’s head of research of financial institutions, Monsur Hussain, said that the FSB’s viewpoint is that further regulation is needed for crypto markets.

This is not only for protecting stakeholders but also for ensuring financial stability and it does not believe that regulating crypto automatically means assigning it legitimacy.

The guidelines were welcomed by Blocktrade’s chief product officer, Konstantin Horejsi. He said that special treatment had never been demanded by the crypto community in terms of regulation.

He added that all they wanted was for boundaries to be established in the same way as the ones that exist for other asset classes.

He went on to say that the recommendations from FSB would serve as a good basis, but it was also dependent on their implementation.

He said that it was likely that there would be a significant difference in how these guidelines are implemented.