FSB finalises global regulatory framework for crypto-asset activities

The FSB has released a Global Regulatory Framework for Crypto-Asset Activities aimed at enhancing regulatory and supervisory consistency worldwide. Indeed, recent events have highlighted the inherent volatility and vulnerabilities of crypto-assets and related players, emphasizing the potential risks to the broader financial system if linkages to traditional finance were to expand further.
The FSB was directed by the G20 to coordinate the development of an effective regulatory and oversight framework for crypto-assets, incorporating insights from the past year’s events and public consultations. The final recommendations build upon the principles of ’same activity, same risk, same regulation,‘ maintaining a high-level and flexible approach that is technology-neutral. Notably, the FSB has strengthened its high-level recommendations in three key areas: safeguarding client assets, addressing conflicts of interest, and enhancing cross-border cooperation.
The scope of the recommendations primarily centers around addressing risks to financial stability and does not provide comprehensive coverage of all specific risk categories related to crypto-asset activities. It’s worth mentioning that CBDCs, being digitalized central bank liabilities, fall outside the purview of these recommendations.
To ensure effective coordination and mutual support, the FSB has collaborated closely with sectoral SSBs and international organizations in monitoring and regulating crypto-asset activities and markets. The global framework includes a shared workplan for 2023 and beyond, aligning efforts to develop a comprehensive and coherent global regulatory framework. This collaborative approach involves providing more detailed guidance by SSBs, ongoing monitoring, and transparent reporting.
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The framework consists of two distinct sets of recommendations:
– The final report High-level Recommendations for the Regulation, Supervision, and Oversight of Crypto-Asset Activities and Markets provides guidance to financial regulatory and oversight authorities on achieving effective regulatory frameworks. These recommendations offer flexibility for adoption across various jurisdictions while establishing a global regulatory baseline. In response to recent market events, they have been enhanced to address potential threats to the financial system. Focusing on fostering safe innovation, the recommendations specifically address regulatory and supervisory issues related to crypto-assets. However, they do not comprehensively cover specific risk categories such as AML/CFT, data privacy, cyber security, investor protection, and other macroeconomic concerns.
– The final report High-level Recommendations for the Regulation, Supervision, and Oversight of Global Stablecoin Arrangements emphasizes the incorporation of feedback from public consultation and stakeholder outreach. The primary goal is to ensure consistent and effective regulation across jurisdictions in order to mitigate potential financial stability risks posed by GSCs at both domestic and international levels. While promoting responsible innovation, the recommendations allow sufficient flexibility for jurisdictions to implement their domestic approaches. The intended audience for these recommendations includes financial regulatory, supervisory, and oversight authorities at a jurisdictional level, and their application should align with each authority’s remits. Additionally, the recommendations adopt a broad and flexible approach to GSCs, intending to adapt to diverse regulatory frameworks worldwide. In cases where specific international sectoral standards apply to a GSC’s economic function, those standards should be implemented by the relevant authorities to address associated risks.
Furthermore, the FSB also published an Umbrella public note to accompany final framework, covering the background of the FSB Global Regulatory Framework for Crypto-Asset Activities, the FSB’s approach to establishing a comprehensive regulatory framework, recent events and implications for the regulation and supervision of crypto-asset activities and stablecoins, and the next steps as well as the FSB-SSB shared workplan as an Annex.