G20 Watchdog Asserts Global Regulations Leave Cryptocurrency Firms with Nowhere to Evade

According to the G20’s Financial Stability Board, universally accepted regulations compel cryptocurrency firms to implement essential precautions to avoid incidents like the FTX exchange and other crypto-related losses. 

G20 Watchdog Asserts Global Regulations Leave Cryptocurrency Firms with Nowhere to Evade

On Monday, the FSB released its conclusive recommendations, as requested by the G20, regarding the oversight of companies engaged in trading crypto assets like bitcoin. Additionally, the watchdog revised its existing recommendations for stablecoins in response to the collapse of TerraUSD/Luna coins.

Both sectors, before reaching a point where they could endanger financial stability, adopt universally recognized principles from mainstream finance. They emphasize strong governance practices to prevent conflicts of interest and implement proper risk management and disclosure measures to ensure clear segregation of customer funds from company assets.

The Financial Stability Board (FSB) warned that recent events have shown how increased linkages to traditional finance could amplify potential spillover effects from crypto asset markets into the broader financial system.

The November 2022 collapse of FTX brought attention to the vulnerabilities present in crypto firms. The Financial Stability Board (FSB) emphasized that all countries, including non-members of the watchdog, should adhere to the recommendations. Despite being located in the Bahamas, which is not an FSB member, FTX’s failure underscored the need for a unified approach to regulations.

FSB Secretary General John Schindler urged crypto asset players to cease operating beyond the regulatory boundaries or disregard existing rules, emphasizing the importance of compliance within the industry.

“We have provided a clear framework, leaving no room for ambiguity, and hence, these players can no longer claim a lack of regulatory clarity,” stated Schindler.

The cryptocurrency market has experienced a resurgence, with Bitcoin reaching 13-month highs, recovering from the previous year’s slump. Ripple Labs Inc’s significant legal triumph against regulators added to the market’s momentum, challenging the extent to which tokens should be subject to U.S. securities law.

While the European Union has already approved a comprehensive set of rules for crypto asset markets, the FSB’s ‘global baseline’ minimum standards cater to jurisdictions seeking even more extensive regulations.

The FSB’s norms are expected to be further detailed with additional measures from global banking and securities watchdogs, namely the Basel Committee and IOSCO, the latter of which proposed the first-ever global approach to regulating day-to-day operations in the crypto market in May.

To ensure adherence to the agreed-upon norms, FSB members commit to their application. A review of the implementation of these standards will be conducted by the FSB by the end of 2025.