The Financial Stability Board (FSB), founded by the G20, has called for stricter rules to protect crypto users’ assets and avoid conflicts of interest.
To contribute to the comprehensiveness and international coherence of regulatory and supervisory approaches, the FSB has published its advisory report on the global regulatory framework for crypto-asset activities.
In the report, it was stated that events that took place last year, such as the bankruptcy of cryptocurrency exchange FTX, showed the structural vulnerabilities and weaknesses of crypto assets and related actors.
Pointing out that the events also show that the failure of a key service provider in the crypto-asset ecosystem can spread risks rapidly to other parts of that ecosystem, it was noted that the effects of crypto-asset markets on the wider financial system may increase if their links with traditional finance grow further.
The report stated that authorities should require crypto-asset service providers to adequately protect client assets and protect their property rights, including in the event of bankruptcy.
Emphasizing that authorities must also have requirements to address risks associated with conflicts of interest, the report stated that crypto-asset service providers, including their affiliates, must be subject to or comply with appropriate regulation, supervision and oversight.
The report stated that the borderless nature of crypto assets demonstrates the importance of “strong and consistent” regulatory, supervisory and enforcement practices, and that crypto-asset producers and service providers may try to avoid regulation and oversight by shifting to places where regulation is lighter, and strong measures are required.