The Financial Stability Board (FSB) – the international body that oversees and makes recommendations on the global financial system – has issued a regulatory framework for cryptocurrencies calling for the adoption of laws commensurate with the risks posed by the sector.
In particular, the FSB declared that cryptographic regulations should be comprehensive and standardized across jurisdictions but aimed at protecting innovations in the sector, the agency said in the framework published on October 11.
At the same time, the Financial Stability Office has acknowledged that laws should focus on building sector technology while borrowing paper from the traditional financial industry.
“An effective regulatory framework should ensure that crypto-asset activities are comprehensively regulated, in proportion to the risks they pose, while exploiting the potential benefits of the technology behind them. Such regulation should ensure equivalent regulatory outcomes as they pose risks similar to those posed by financial activities. traditional, while addressing the new characteristics of crypto assets.”
Stable Coin Rules
Elsewhere, the agency recommends regulating stablecoins, especially after the collapse of the Terra (LUNA) ecosystem. The framework notes that policy makers should fully ensure that stablecoin issuers are backing up their assets to prevent failure.
“Belief in algorithms and arbitrage activities are not effective mechanisms for achieving stability. Indeed, as the report explains, many existing stablecoins, including Terra/Luna, will not meet the FSB’s high-level recommendations,” the FSB added.
After the framework is released, the public will have the opportunity to share their views by December 15, and the Federal Security Council notes that the goal is to achieve consistency in the regulatory framework.
Increased pressure to regulate cryptocurrency
In particular, the FSB has accelerated its demands for global crypto regulations by inviting various jurisdictions to collaborate on a working framework. The talks came amid a massive crypto market correction in 2022.
As reported by Coinphony, the FSB noted that the need for regulation stems from the unreliability of digital assets. According to the authority, cryptocurrencies are an “untrusted store of value” hence the need for “strong regulation.”
It should be noted that many jurisdictions are submitting drafts to regulate the sector led by the US and the EU. The European Union recently passed the Markets Crypto Assets Act (MiCA) to manage the crypto space.
The Financial Stability Board offers post-advice on crypto rules protecting innovation, which first appeared on Coinphony.