Global Crypto Framework: FSB Concludes Recommendations for Regulation

The Financial Stability Board (FSB), an international organization overseeing the global financial system, has finalized its recommendations for a global regulatory framework for cryptocurrencies. The guidelines, presented to the G20 economies, are built 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. The recommendations consist of high-level guidelines for regulating cryptocurrencies in general, as well as revised recommendations specifically for global stablecoins—stablecoins that can be used across jurisdictions.

According to the FSB, crypto platforms should ensure the segregation of clients’ digital assets from their own funds and establish clear separation of functions to avoid conflicts of interest. Regulators are urged to foster close cross-border cooperation and provide oversight in this regard.

The FSB also acknowledges the importance of privacy, calling for local regulators to prevent activities that could hinder the identification of responsible entities or affiliated entities, particularly in decentralized finance (DeFi) protocols. One of the high-level recommendations emphasizes that authorities should have access to necessary data to fulfill their regulatory and supervisory mandates.

Regarding global stablecoins, the FSB highlights the need for stablecoin issuers to have identifiable and responsible legal entities or individuals constituting a “governance body.” It further states that issuers should maintain reserve assets in a minimal proportion of 1:1, unless they are subject to prudential requirements equivalent to those of commercial banks.

Notably, the guidelines suggest that issuers of global stablecoins may be required to obtain permits to operate in each jurisdiction. The FSB recommends that authorities only permit the operation of a global stablecoin arrangement if it meets all regulatory, supervisory, and oversight requirements of the jurisdiction, including obtaining affirmative approval.

The FSB plans to assess the implementation of its recommendations globally by the end of 2025. In September 2023, it will release a joint report with the International Monetary Fund (IMF) to the G20, focusing on existing policies and regulatory issues.

Recently, the Association for Financial Markets in Europe (AFME) referred to the FSB’s stance, urging European Union lawmakers to include decentralized finance (DeFi) in the first EU-wide crypto framework.

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