FSB’s New Framework Proposal
The Financial Stability Board (FSB), an international monitoring body, has put forward a comprehensive framework aimed at regulating cryptocurrencies to mitigate potential risks while leveraging the technology’s benefits. Announced on October 11, the proposed framework is currently open for public comment, inviting insights on various policy initiatives surrounding the crypto ecosystem.
Public Comment Period
The FSB plans to submit its recommendations by December 15 to G20 finance ministers and central bank governors, aiming to promote consistency and comprehensiveness in the regulatory approaches to crypto-asset activities and markets. FSB’s proposal emphasizes the principle of ‘same activity, same risk, same regulation,’ suggesting that where crypto-assets and intermediaries perform equivalent functions to traditional financial instruments, they should be subjected to similar regulatory measures.
Focus on Stablecoins
In addition to general digital asset guidelines, the report specifically targets stablecoins, proposing a review of recommendations made in October 2020. The board noted that, in light of recent market dynamics and the ongoing ‘crypto winter,’ there is an urgent need to address structural vulnerabilities in crypto markets.
Recent Market Turmoil
FSB chair Klaas Knot referenced recent chaos in the crypto markets in a letter accompanying the proposal, acknowledging how the current market conditions have heightened concerns about the risks associated with these assets. Knot stated: ‘Public expectations regarding a robust international framework to identify, monitor, and address these risks are rising.’ This indicates that regulatory scrutiny is intensifying as the crypto environment continues to evolve.
About the Financial Stability Board
Created under a G20 summit during the global financial crisis of 2009, the FSB comprises members from 25 jurisdictions, featuring representatives from financial regulators, central banks, and finance ministries. However, it is vital to note that the board has no enforcement powers, functioning primarily as an advisory body to assist in regulatory coordination.
