According to the G20’s Financial Stability Board (FSB), crypto firms have nowhere to escape due to globally agreed rules, which mandate the implementation of basic safeguards to prevent incidents like those witnessed at FTX exchange and other crypto casualties.
On Monday, the FSB published final recommendations, as requested by the G20, for supervising firms engaged in trading cryptoassets like bitcoin. The FSB also revised its existing recommendations for stablecoins following the collapse of TerraUSD/Luna coins.
These recommendations draw from established principles in mainstream finance to ensure the sector adopts robust governance practices to prevent conflicts of interest, implements proper risk management and disclosures, and safeguards customer funds by segregating them from company assets.
The FSB emphasized that as linkages between cryptoassets and traditional finance expand, there is an increased risk of spillovers into the broader financial system. Hence, the FSB urged all countries, including non-members, to apply the recommendations, highlighting the vulnerabilities exposed by FTX’s collapse despite it not being an FSB member (based in the Bahamas).
FSB Secretary General John Schindler stated that cryptoasset players must adhere to existing rules and stop operating outside the regulatory perimeter. The FSB’s framework provides clarity on the applicable standards, eliminating any argument about a lack of regulatory clarity.
Bitcoin has surged to 13-month highs, indicating sector recovery from the previous year’s downturn. Ripple Labs Inc also achieved a significant legal victory, challenging regulators regarding the scope of tokens falling under U.S. securities law.
While the European Union has already approved comprehensive rules for cryptoasset markets, the FSB’s ‘global baseline’ minimum standards can accommodate jurisdictions seeking additional measures.
The FSB norms are expected to be further detailed with additional measures from Basel Committee and IOSCO, global banking and securities watchdogs. In May, IOSCO proposed the first global approach to regulating day-to-day operations in the crypto market.
By the end of 2025, the FSB, whose members commit to implementing agreed norms, will review the implementation of these standards.