FSB Proposes Comprehensive Framework for International Regulation of Cryptoasset Activities

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The Financial Stability Board (FSB) recently unveiled a comprehensive set of proposals for regulating and supervising cryptoasset activities, termed the “proposed framework for the international regulation of cryptoasset activities.” This milestone announcement, made in October 2022, marks a significant step in addressing potential financial stability risks posed by cryptoassets, including “stablecoins.”

The FSB, acknowledging the rapidly evolving cryptoasset markets and their growing interconnectedness with the traditional financial system, aims to develop an effective regulatory framework. This framework seeks to subject cryptoasset activities to comprehensive and commensurate regulation, balancing the potential risks and benefits of the underlying technology.

The Core Components of the Proposed Framework:

The proposed framework consists of two interconnected components:

  1. Regulation, Supervision, and Oversight of Crypto-Asset Activities and Markets: Consultative Report

The FSB’s consultative report explores key regulatory and supervisory issues related to cryptoasset activities, with a particular focus on mitigating financial stability risks. The publication delves into essential activities and examines the interconnectedness of cryptoasset markets. Moreover, it provides an overview of applicable international standards and analyzes regulatory and supervisory approaches adopted by FSB member and non-member jurisdictions represented on FSB Regional Consultative Groups.

The consultative report identifies critical challenges and potential gaps in regulatory, supervisory, and oversight approaches. It proposes a set of nine high-level recommendations for the comprehensive regulation, supervision, and oversight of cryptoasset activities and markets. These recommendations aim to foster consistency and comprehensiveness in regulatory approaches, enhance international cooperation and coordination, and promote information-sharing among relevant stakeholders.

  1. Review of the FSB High-level Recommendations of the Regulation, Supervision, and Oversight of “Global Stablecoin” Arrangements: Consultative Report

In its efforts to address stablecoins’ unique characteristics and potential risks to financial stability, the FSB previously issued a set of 10 high-level recommendations for the regulation, supervision, and oversight of “Global Stablecoin” (GSC) arrangements. Following endorsement by the Group of Twenty (G20), the FSB provided a status update on the progress made on implementing these recommendations in October 2021.

In 2022, the FSB conducted a thorough review of the GSC recommendations in collaboration with international standard-setting bodies (SSBs) and international organizations. The resulting report presents findings from this review, which includes an analysis of recent market and policy developments, characteristics of existing stablecoins, and the regulatory initiatives of SSBs.

The revised high-level GSC recommendations aim to ensure consistent and effective regulation, supervision, and oversight of GSCs across jurisdictions. They address the potential financial stability risks associated with stablecoin arrangements while supporting responsible innovation. The recommendations also offer flexibility for jurisdictions to implement domestic approaches that align with international standards.

International Collaboration for a Coordinated Approach:

The FSB has been working closely with several international bodies, including the International Monetary Fund, the World Bank, the Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructures, the International Organization of Securities Commissions, and the Financial Action Task Force. This collaborative effort ensures that monitoring and regulating cryptoasset activities and markets are well-coordinated and mutually supportive.

Public Engagement and the Way Forward:

In line with its commitment to inclusive decision-making, the FSB invited public feedback on the proposed framework and the set of questions accompanying it. Public engagement plays a vital role in shaping effective regulatory measures and taking into account diverse perspectives from various stakeholders.

The proposed framework for the international regulation of cryptoasset activities marks a crucial step towards ensuring financial stability and safeguarding the global financial system in the face of rapidly evolving cryptoasset markets. With public feedback being sought, the FSB demonstrates its commitment to developing a balanced and robust regulatory approach.

Note: This blog story is based on information from the Financial Stability Board’s official publications and announcements. The views and interpretations presented are solely for informative purposes and not financial advice. Readers are encouraged to refer to the original reports and engage in further research for a comprehensive understanding

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