G20s Recommendations for Crypto Industry: Tighter Regulations and Standardized Frameworks

G20’s Financial Stability Board Provides 9 Crypto Industry-Centric Recommendations

The G20’s Financial Stability Board (FSB) has released a report outlining its recommendations for regulating the crypto industry. The FSB aims to establish tighter regulations and standardized frameworks to ensure the stability and responsible innovation of crypto asset operations. The report highlights recent failures in the industry, such as the depegging event of Terra’s stablecoin and the implosion of FTX, and acknowledges the potential risks posed to the traditional financial system. The FSB’s recommendations stress the need for comprehensive regulation of crypto asset activities that perform similar economic functions as traditional finance. They also emphasize the importance of safeguarding client assets, removing conflicts of interest, and promoting cross-border cooperation.

Main breakdown of the FSB’s recommendations:

Encouraging collaboration between financial authorities and standard-setting bodies
Comprehensive regulation of crypto asset activities with economic functions similar to traditional finance
Subjecting crypto asset activities to identical or equivalent regulation regardless of their execution or promotion
Allowing flexibility for standard-setting bodies to address crypto sector-specific issues
Focus on safeguarding client assets, removing conflicts of interest, and establishing cross-border cooperation

In September 2023, the FSB and the International Monetary Fund (IMF) will deliver a joint report to the G20, summarizing the policy findings on macroeconomic and monetary issues related to the crypto industry.

Hot Take

The FSB’s recommendations reflect the growing concern over the potential risks and interlinkages between the crypto asset and traditional financial systems. By promoting collaboration, comprehensive regulation, and safeguarding client assets, the FSB aims to foster responsible innovation while mitigating the risks associated with the crypto industry. However, striking the right balance between regulation and innovation remains a challenge. It is crucial for countries and standard-setting bodies to adapt their regulatory frameworks to address the evolving nature of crypto assets and ensure the stability of the financial system.