In recent years, the cryptocurrency sector has experienced a rollercoaster ride, with 2022 being particularly challenging. The industry witnessed more setbacks than successes, primarily due to the collapse of several platforms, prompting regulators worldwide to take action. The necessity for multiple countries to intervene and establish global regulations became increasingly apparent. The Financial Stability Board [FSB] of G20 has now asserted that implementing these regulations will push cryptocurrency firms to navigate cautiously.
The International Organization of Securities Commissions [IOSCO] unveiled the proposal for these regulations in May, with the objective of overseeing the everyday activities within the cryptocurrency market. Following this, on Monday, the FSB issued its completed set of recommendations, as requested by the G20. This included changes pertaining to the oversight of companies involved in trading crypto assets.
The recent modifications were made with the intention of addressing the effects of crypto assets on traditional financial systems. Given the continuous growth of the cryptocurrency industry, there has been a notable concern about the potential impact of these assets on overall financial stability. The FSB added,
“As recent events have illustrated, if linkages to traditional finance were to grow further, spillovers from crypto asset markets into the broader financial system could increase.”
Additionally, the FSB made revisions to its existing recommendations concerning stablecoins in light of the recent failure of TerraUSD.
What about countries outside FSB’s perimeter?
Amidst the persistent turmoil within the crypto industry in 2022, the situation intensified notably in November. The collapse of FTX created significant disruption. It is worth noting that FTX was headquartered in the Bahamas. This country, however, is not a member of the FSB. Consequently, the FSB urged all nations, including non-members of the organization, to adopt its recommendations in response to the incident. FSB Secretary General John Schindler said,
“Therefore, crypto asset players need to stop operating outside the regulatory perimeter or in non-compliance with existing rules. These players can no longer argue there is a lack of regulatory clarity, as our framework makes clear the standards that should apply.”
Ahead of the FSB’s evaluation by the end of 2025, the G20 anticipates that crypto firms will have no choice but to implement essential safeguards to mitigate potential failures. The FSB, whose members commit to upholding established standards, will assess the implementation of these measures in due course.