Financial Stability Board (FSB), the G20 body tasked with monitoring and advising on the global financial system, announced on July 17, 2023, that stringent global rules have left cryptocurrency firms with "nowhere to hide." To prevent asset losses similar to those suffered by FTX exchange and other crypto victims, FSB will mandate crypto companies to implement fundamental safeguards.
The FTX Collapse and Its Implications
FTX was a widely recognized cryptocurrency exchange offering:
- Digital asset trading (crypto-to-crypto and crypto-to-fiat pairs)
- Derivatives and futures contracts
- Leveraged trading services
Its November 2022 collapse exposed critical vulnerabilities in crypto enterprises, prompting FSB to assert that all nations—whether FSB members or not—should adopt its recommendations. Notably, FTX was headquartered in the Bahamas, a non-FSB jurisdiction.
FSB's 9-Point Regulatory Framework
Responding to crypto's growing economic influence, FSB proposed nine high-level recommendations for regulators to oversee crypto firms and markets, alongside revised stablecoin guidelines:
- Cross-border collaboration among regulators
- Governance requirements for crypto issuers
- Mandatory disclosures for industry participants
- Risk-proportionate supervision of stablecoins
- Liquidity and redemption safeguards
- Conflict-of-interest mitigation
- Operational resilience standards
- Consumer protection protocols
- Anti-money laundering (AML) compliance
👉 Explore how top exchanges implement these safeguards
Key Risks Identified by FSB
- Structural fragility: Crypto's inherent volatility and ecosystem interconnectedness allow risks to cascade rapidly.
- Spillover potential: Increased ties with traditional finance could amplify systemic risks.
- Regulatory arbitrage: Firms operating outside existing frameworks undermine stability.
"Market participants must cease operating in regulatory gray zones," emphasized FSB Secretary-General John Schindler. "Our framework eliminates ambiguity about applicable standards."
Industry Reactions
Monsur Hussain (Fitch Ratings):
"Regulation aims to protect stakeholders—not legitimize volatile assets."
Konstantin Horejsi (Blocktrade):
"The crypto community seeks parity with traditional asset classes. FSB's recommendations provide a foundational policy blueprint, though implementation variances will persist."
He cited Europe's MiCA regulation as a likely template for other economies.
FAQs
Q1: How does FSB's framework affect decentralized finance (DeFi) projects?
A1: While targeting centralized entities primarily, the principles may extend to DeFi protocols offering similar financial services.
Q2: What's the timeline for implementing these rules?
A2: FSB and IMF will submit a joint report to G20 in September 2023, with phased adoption expected through 2024-2025.
Q3: Are CBDCs included in these regulations?
A3: No. Central bank digital currencies fall under separate monetary policy frameworks.
👉 Stay updated on regulatory developments
Global Coordination Moving Forward
FSB and standard-setting bodies will:
- Harmonize cross-border supervision via a 2023-2024 work plan
- Develop granular guidelines for crypto market activities
- Monitor risks through public reporting mechanisms
This coordinated approach ensures "same activity, same risk, same regulation"—balancing innovation with financial stability.
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