The Financial Stability Board (FSB), an international organization responsible for monitoring the global financial system, has finalized its recommendations for a global crypto framework. These guidelines have been presented to the G20, a group of the world’s leading economies.
Additionally, they are based on the principle of “same activity, same risk, same regulation.” On July 17, the FSB released a public note along with two separate guideline documents.
High-Level Recommendations for Regulating Crypto
Under the FSB’s recommendations, crypto platforms must ensure the segregation of clients’ digital assets from their own funds. It is crucial for these platforms to clearly separate their functions to avoid any potential conflicts of interest. However, to enforce these guidelines effectively, regulators must establish tight cross-border cooperation and oversight.
Furthermore, FSB emphasizes that crypto platforms should maintain a clear separation between their own funds and the digital assets entrusted to them. This is to to protect clients’ assets. Also, this segregation of assets ensures that clients’ holdings are adequately safeguarded.
By separating functions, crypto platforms can avoid conflicts of interest that may arise from the simultaneous handling of clients’ assets and their own funds. This separation further promotes transparency and accountability within the industry.
Regulators play a crucial role in enforcing the FSB’s recommendations. Cross-border cooperation and oversight are essential to ensure that crypto platforms adhere to the guidelines effectively. Even more, this collaborative approach helps maintain the integrity of the global financial system.
Revised High-Level Recommendations for Global Stablecoins
The FSB’s recommendations also address the regulation of global stablecoins, referring to any stablecoin that could be used in multiple jurisdictions.
Furthermore, the FSB stresses the importance of stablecoin issuers having identifiable and responsible legal entities or individuals constituting a “governance body.” This ensures that stablecoin operations are conducted with accountability and transparency.
Even more, Stablecoin issuers are expected to maintain reserve assets in a minimal 1:1 proportion. This is unless they are subject to adequate prudential requirements equivalent to those imposed on commercial banks. This measure ensures the stability and reliability of stablecoins.
The FSB introduces the potential requirement for “global stablecoin” issuers to obtain permits to operate in each jurisdiction. This means that authorities will not permit the operation of a global stablecoin arrangement unless it meets all regulatory, supervisory, and oversight requirements in a particular jurisdiction.
Privacy and Access to Data, Implementation and Reporting
FSB underscores the necessity for authorities to access relevant data to fulfill their regulatory, supervisory, and oversight mandates. All these while recognizing the importance of privacy. This includes data related to decentralized finance (DeFi) protocols, which should not frustrate the identification of responsible entities or affiliated entities.
The FSB plans to review the global implementation of its recommendations by the end of 2025. In September 2023, in collaboration with the International Monetary Fund, it will deliver a joint report to the G20, addressing existing policies and regulatory issues.
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