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A strong worldwide crypto framework is necessary to stop the funding of terrorism and money laundering
The recent crypto winter has confirmed our analysis of the structural weaknesses that already exist, says FSB Chair
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The global oversight organisation Financial Stability Board, or FSB, proposed a comprehensive framework for crypto assets to manage any dangers and harness potential benefits of the technology.
The FSB invited public feedback on a potential crypto regulatory framework, including proposed policy measures, financial stability issues, and the methodology the organisation would employ to establish standards for digital assets, in a study published on October 11.
The FSB will present suggested proposals to the G20 finance ministers and central bank governors "to promote the coherence and comprehensiveness of regulatory, supervisory and oversight approaches to crypto-asset activities and markets," the study states.
The FSB proposal said, "Effective regulatory and supervisory frameworks should be based on the principle of 'same activity, same risk, same regulation. Where crypto-assets and intermediaries perform an equivalent economic function to one performed by instruments and intermediaries of the traditional financial sector, they should be subject to equivalent regulation."
In its report, the board also addressed stablecoins and recommended that the October 2020 proposals be reviewed. Public opinions on the suggestions must be made by December 15 to be considered.
FSB chair Klaas Knot noted the following in an accompanying letter to the G20 dated October 3, "The current 'crypto winter' has reinforced our assessment of existing structural vulnerabilities in these markets. Concerns about the risks they pose to financial stability are therefore likely to come back to the fore sooner rather than later, as are public expectations that policymakers have in place a robust international framework to identify, monitor and address those risks."
Nine high-level recommendations from the framework have been made to close gaps in crypto-assets markets. The research urges authorities to effectively implement their authority and resources to monitor crypto markets and activities according to their present risk.
The FSB stated that crypto has a combined value of about $935 billion, compared to $3 trillion at its peak in November last year. However, it is still not large enough to threaten financial stability. Moreover, rules regarding digital assets are needed to regulate a likely recovery.
Members of the FSB, established in 2009 as a result of a G20 conference, represent institutions from 25 different countries, including financial regulators, central banks, and ministries of finance. However, the board primarily serves as an advisory body and lacks enforcement power over the entities.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
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