The bear market of 2022 and the series of bankruptcies have led to a push for greater regulation in the crypto ecosystem. Consequently, the Financial Stability Board (FSB), the international body that advises G20 nations on global finance has finalized recommendations for regulating global cryptocurrency activities. The recommendations were categorized into two sets.
Recommendation Focus on Crypto Assets and Stablecoin
The first set contains nine recommendations that bother on appropriate regulation, supervision, and oversight of crypto asset activities and markets. More importantly, it encompasses data collection, monitoring issuer governance frameworks, and fostering cross-border regulatory cooperation. Also, the FSB emphasized the need for standard risk assessments of the impact of digital assets on the financial sector.
In addition, digital assets service providers and crypto issuers are required to provide detailed information about their operations, risk profiles, and offerings. The other set of recommendations proposed by the FSB is focused on regulating global stablecoin arrangements. Similar to the first, it insists that authorities demand concise recovery and resolution plans from the crypto asset issuers.
Crypto Issuers Mandated to Follow Regulation
According to the recommendation, issuers would need to provide a strong legal claim for prompt redemption for users. In the case where a stablecoin is supported by a single fiat currency, the redemption must be directly proportional to the currency’s value. The agency calls for cross-border cooperation between regulators, governance requirements for crypto issuers, and compulsory disclosures for the nascent crypto industry.
Most of the recommendations took into consideration the feedback received by the FSB from its public consultation on the subject.
G20 Authorities Calls For Global Crypto Regulation
The agency confirmed that the introduction of the global crypto regulation was prompted by the numerous crypto meltdowns last year including that of FTX and TerraLUNA. Since the beginning of this year, discussions have been ongoing at G20 on collectively regulating crypto.
“The events of the past year have highlighted the intrinsic volatility and structural vulnerabilities of crypto-assets and related players,” per an FSB press release. “They have also illustrated that the failure of a key service provider in the crypto-asset ecosystem can quickly transmit risks to other parts of that ecosystem.”
Nirmala Sitharaman, India’s finance minister has been at the forefront of the worldwide agreement for crypto regulation.