FSB finalises recommendations for global crypto framework

• The FSB recommends that authorities ensure adequate disclosures from crypto asset issuers and providers.
• Segregation of funds to protect clients and measures to ensure no conflict of interest are also highlighted.
• The watchdog also recommends global rules for stablecoins be adopted.

The Financial Stability Board (FSB) said in its latest crypto asset report that the sector needs to see more disclosures on the part of providers and broader cooperation from regulators across the globe.

FSB, tasked by the G20 to come up with a comprehensive framework for crypto regulation, has published two sets of recommendations. The first set relates to the global approach to crypto regulation, including the supervision and oversight of digital asset activities and markets. 

Meanwhile, the second set of recommendations focuses on global stablecoin regulation.

“Our global regulatory framework for crypto-asset activities seeks to ensure that crypto assets and global stablecoins are subject to robust regulation and supervision and do not pose risks to financial stability,” the organisation said.

FSB recommendations include disclosures, segregation of funds

A press release the organisation published on Monday, July 17, highlighted the two documents, noting that “the final recommendations draw on the implementation experiences of jurisdictions and build on the principles – ‘same activity, same risk, same regulation’; high-level and flexible; and technology neutral – that informed the consultative framework.”

The framework comes after a tumultuous year for crypto going back to summer of 2022, and the FSB says it strengthened the recommendations with the events in mind. Among these are the dramatic collapse of TerraUSD and the implosion of cryptocurrency exchange FTX.

As a result, three of the key areas with greater focus are safeguarding of client assets, addressing concerns around conflicts of interest and strengthening of cross-border cooperation among regulators.

In total, the watchdog has outlined nine key recommendations for the global framework for regulation of crypto asset activities and markets and 10 for the regulation and oversight of stablecoins. One of the recommendations on regulation of crypto asset activities focuses on disclosures and FSB stated:

“Authorities should require that crypto-asset issuers and service providers disclose to users and relevant stakeholders comprehensive, clear and transparent information regarding their governance framework, operations, risk profiles and financial conditions, as well as the products they provide and activities they conduct.”

In the press release, FSB noted that the final recommendations in the two documents incorporated the lessons picked from events within the crypto market over the past year. They also include feedback collated during the public consultation.

The European Union and the UK are among jurisdictions to pursue comprehensive regulation for crypto asset activities and stablecoins. The EU’s Markets in Crypto-Assets (MiCA) regulation is expected to take effect in 2024, while UK’s Financial Services and Markets Acts received the royal assent in June following approval by parliament. 

As reported in April, the UK could deploy its crypto laws by early 2024 as it looks to become a crypto hub.