The Financial Stability Board (FSB) published its global regulatory framework for crypto-asset activities on July 17, to promote the comprehensiveness and international consistency of regulatory and supervisory approaches.
The final recommendations, requested by the G20, draw on the implementation experiences of jurisdictions and build on the principles – “same activity, same risk, same regulation”; high-level and flexible; and technology neutral – that informed the consultative framework.
They also incorporate lessons learned from events of the past year in crypto-asset markets such as the collapse of FTX in November 2022 and feedback received during the FSB’s public consultation.
Stablecoin recommendations
The FSB has also revised its existing recommendations for stablecoins in the light of events of the past year eg the crash of TerraUSD/Luna coins.
The regulator has strengthened both sets of high-level recommendations in three areas:
- ensuring adequate safeguarding of client assets;
- addressing risks associated with conflicts of interest; and
- strengthening cross-border cooperation.
Crypto-asset activities and markets
High-level recommendations for the regulation, supervision and oversight of crypto-asset activities and markets:
- Authorities should have appropriate regulatory powers and tools.
- Authorities should apply a comprehensive and effective regulatory framework – in line with the principle “same activity, same risk, same regulation”.
- Authorities should apply cross-border cooperation, coordination and information sharing.
- Authorities should require that crypto-asset issuers and service providers have in place and disclose a comprehensive governance framework.
- Authorities should require crypto-asset service providers to have an effective risk management framework in place.
- Authorities should require that crypto-asset issuers and service providers have in place robust frameworks, including systems and processes, for data collection, recording and reporting.
- Authorities should require that crypto-asset issuers and service providers disclose to users and relevant stakeholders comprehensive, clear and transparent information regarding their governance framework, operations, risk profiles and financial conditions, as well as the products they provide and activities they conduct.
- Authorities should identify, monitor and address financial stability risks arising from interconnections and interdependencies.
- Authorities should ensure that crypto-asset service providers and their affiliates that combine multiple functions and activities, where permissible, are subject to appropriate regulation, supervision and oversight that comprehensively address the risks associated with individual functions and the risks arising from the combination of functions.
Global stablecoin arrangements
Revised high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” arrangements.
- Authorities’ readiness to regulate and supervise global stablecoin arrangements (GSC).
- Authorities should apply comprehensive oversight of GSC activities and functions
- Authorities should apply cross-border cooperation, coordination and information sharing.
- Authorities should require that GSC arrangements have in place governance structures and decentralised operations
- Authorities should require that GSC arrangements have effective risk management frameworks in place.
- Authorities should require that GSC arrangements have in place robust frameworks, including systems and processes for data storage and access to data.
- Authorities should require that GSC arrangements have appropriate recovery and resolution plans.
- Authorities should require that GSC issuers and, where applicable, other participants in the GSC arrangements provide all users and relevant stakeholders with comprehensive and transparent disclosures.
- Authorities should require that GSC arrangements provide robust redemption rights, stabilisation, and prudential requirements.
- Authorities should require that GSC arrangements conform with regulatory, supervisory and oversight requirements before commencing operations.
CBDCs out of scope
The recommendations focus on addressing risks to financial stability, and they do not comprehensively cover all specific risk categories related to crypto-asset activities.
Central Bank Digital Currencies (CBDCs), envisaged as digitalised central bank liabilities, are not subject to these recommendations.
