Home Crypto Events G20 Financial Stability Board Urges Crypto Firms to Implement Safeguards to Prevent Market Blow-Ups

G20 Financial Stability Board Urges Crypto Firms to Implement Safeguards to Prevent Market Blow-Ups

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The Financial Stability Board (FSB), an international regulatory body representing the G20, has released its final recommendations for the supervision of cryptoasset trading firms. The FSB’s goal is to establish a set of universal safeguards based on mainstream finance principles to prevent market blow-ups and maintain financial stability in the crypto industry.

The FSB’s recommendations come in response to recent incidents that have highlighted the risks associated with crypto firms. One notable example is the collapse of FTX exchange in November 2022. This event underscored the importance of implementing regulatory measures to mitigate potential threats to financial stability. The FSB emphasizes that these recommendations should be applied by all countries, even those that are not members of the FSB, to ensure comprehensive oversight of the crypto industry.

John Schindler, the Secretary General of the FSB, stressed the need for crypto firms to operate within the regulatory framework and comply with existing rules. He emphasized that the FSB’s framework provides clarity on the standards that should apply, leaving no room for arguments regarding regulatory ambiguity.

The FSB’s recommendations primarily focus on two key areas: robust governance and risk management, and the segregation of customer funds. By implementing these measures, crypto firms can avoid conflicts of interest, ensure proper risk assessment and disclosure practices, and protect customer funds by keeping them separate from company assets.

The FSB recognizes the increasing integration of cryptoassets with traditional finance and the potential spillover effects into the broader financial system. Therefore, establishing a global baseline of minimum standards is crucial. The recommendations provide a flexible framework that can be adapted to different jurisdictions, allowing countries to implement additional regulations as needed. While the European Union has already approved comprehensive rules for cryptoasset markets, the FSB’s recommendations serve as a foundation for jurisdictions worldwide.

To further strengthen the regulatory landscape, additional measures are anticipated from global banking and securities watchdogs such as the Basel Committee and the International Organization of Securities Commissions (IOSCO). In May, IOSCO proposed a global approach to regulating day-to-day operations in the crypto market, aiming to standardize practices and enhance investor protection.

The FSB, whose members commit to applying agreed-upon norms, will review the implementation of these recommendations by the end of 2025. This review will ensure that the necessary safeguards are effectively put into place and provide an opportunity for further refinements based on evolving market dynamics.

As the crypto market continues to recover from the previous year’s downturn, the recent legal victory for Ripple Labs Inc against regulators adds momentum to the industry. The FSB’s efforts to establish global safeguards align with the ongoing regulatory developments worldwide. By fostering a more secure and stable environment, these measures aim to enhance investor confidence, promote responsible practices, and ensure the long-term sustainability of the crypto industry.

In conclusion, the Financial Stability Board’s final recommendations for the supervision of cryptoasset trading firms highlight the importance of implementing basic safeguards to prevent market disruptions and maintain financial stability. The recommendations focus on robust governance, risk management, and the segregation of customer funds. With global coordination and regulatory compliance, the crypto industry can build trust, enhance investor protection, and pave the way for a sustainable future of digital assets.

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Maheen Hernandez

A finance graduate, Maheen Hernandez has been drawn to cryptocurrencies ever since Bitcoin first emerged in 2009. Nearly a decade later, Maheen is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies. Appreciate the work? Send a tip to: 0x75395Ea9a42d2742E8d0C798068DeF3590C5Faa5

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