Cryptocurrency firms can't hide from global regulations – G20
Date: 2023-07-17 Author: Karina Ziganova Categories: BUSINESS
The G20 Financial Stability Board (FSB) believes that globally agreed rules leave crypto firms with no choice but to introduce basic security measures to prevent stories like the FTX exchange. Reuters writes about it.
The Council on Monday, July 17, unveiled recommendations for the supervision of cryptocurrency firms. The authority also revised its existing guidelines for stablecoins in light of the collapse of the TerraUSD and Luna coins in May last year.
Among the main recommendations is to insulate the financial sector from the crypto industry until it is large enough to pose a threat to financial stability. In this case, reliable management will be required to avoid conflicts of interest, as well as to guarantee the safety of client money.
"As recent events have shown, if links with traditional finance continue to develop, the spillover effects from crypto-asset markets into the broader financial system could increase," the FSB said.
Regulation
The collapse of FTX in November 2022 exposed the vulnerabilities of crypto firms, and the FSB said that all countries should apply the recommendations, even those that are not members of the supervisory authority. Moreover, crypto market participants are advised to operate in jurisdictions that are subject to the FSB.
"In this way, market participants can no longer claim that there is a lack of regulatory clarity, since our framework clearly defines the standards that should be applied." FSB Secretary General John Schindler said.It is also expected that the FSB regulations will become more detailed due to additional measures by the Basel Committee's Global Banking and Securities Supervisory Committee and IOSCO. Members of the regulator will check how its norms are implemented in practice by the end of 2025.
Preparing for explosive growth
At the beginning of last year, before the collaboration between Terraform Labs and FTX, the Financial Stability Board had already urged financial regulators around the world to prepare for the rapid growth of the market cryptocurrencies. At that time, the regulator warned of growing risks around cryptocurrencies as large banks and hedge funds entered the market.
At the same time, the lack of sufficient regulation and supervision of the decentralized finance (DeFi) market can threaten international financial stability. However, the FSB did not identify any specific risks.
A few months later, the crypto market faced a shock in the form of the collapse of the Terraform Labs ecosystem, which led to the beginning of the crypto winter. In November 2022, the bankruptcy of FTX once again showed the need to start regulating the crypto industry as soon as possible.
