Financial watchdogs want global rules for cryptocurrency
Global stability watchdogs have proposed global cybercurrency rules following the recent dislocations in the cryptocurrency market. Overall, the Financial Stability Board (FSB) made nine recommendations, as it announced on Tuesday. This includes, among other things, that cryptocurrency companies should hold capital like banks if they operate similar businesses to financial institutions.share article
The Financial Stability Board coordinates the development of international standards and financial rules within the G20, the group of the 20 most important industrialized and emerging countries.
So far largely unregulated
In many countries, cryptocurrencies are largely unregulated. At the beginning of July, the European Union (EU) was the first major economic region to agree on regulations for cryptocurrencies. In the course of the market turbulence of the past few months, the value of cyber currencies had fallen from around three trillion dollars in November 2021 to just around 935 billion dollars (964 billion euros). The interest rate hikes in the US and the prospect of stricter regulations had led to price falls. Some crypto companies, such as Voyager Digital, have even had to file for bankruptcy.
Klaas Knot, Chair of the Financial Stability Board
This turmoil has once again underscored the need for a comprehensive approach to cryptoasset regulation.
Commenting on the proposals, Dutch central bank governor Klaas Knot, chairman of the Financial Stability Board, said the stock market turmoil had strengthened the governing body’s view that structural vulnerabilities existed. “This turmoil has once again underscored the need for a comprehensive approach to cryptoasset regulation,” he said in a letter to G20 finance ministers and central bank governors.
The FSB proposes setting up a supervisory framework to monitor and manage risks and data from crypto firms, as well as plans for the smooth resolution of struggling crypto firms. If such firms do business like banks, they should be regulated like banks. The underlying principle is that the same activities should be regulated in the same way, regardless of whether it is a cryptoasset company, a bank or a payment provider. Crypto firms may also need to clarify some of their business to ensure this. The proposals strive for internationally uniform regulation of cryptocurrencies.
Public consultations on the proposals will continue until December 15th. They should be finalized by mid-2023. Then the FSB member states should implement them quickly.