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G20 backed financial regulators proposes framework to oversee crypto activity

On October 11, the Financial Stability Board (FSB), which oversees and advises the Group of 20 Economies (G20), proposed a framework for regulating cryptocurrencies, which it hopes nations would adopt by the end of the crypto winter. FSB has also provided nine proposals for these nations to follow.

G20

Currently, cryptocurrency use is mostly unregulated across all nations, with a majority of businesses merely required to abide by laws against terrorism financing and money laundering.

However, the events that caused crypto markets to plunge from $3 trillion in market capitalization to just under $1 trillion have prompted the FSB to consider that crypto firms should be required to maintain larger levels of capital, similar to banks or other payment providers.

 The FSB stated, “Several crypto-asset lenders failed during the recent market volatility as a result of vulnerability to runs, thin capitalization, concentrated exposures to dangerous entities, and risky trading and commercial endeavours.”

In addition to this requirement, the FSB stated that cryptocurrency enterprises should have an inspection framework that would manage risk and data at these organisations and contain backup plans for an orderly closure in the event of any crisis.

FSB chair Klaas Knot states that the decline in the value of crypto assets over the last year, has supported the board’s belief that the industry still lacks fundamental structural integrity.

As per Knot, the legal framework would be necessary for cryptocurrencies, even though their current size does not pose a threat to the stability of the global economy.

Knot stated to the G20 finance ministers, “Concerns over the risks they represent to financial stability are therefore likely to come back to the fore sooner rather than later.”

Public comment on the plans is accepted until December 15. Members of the FSB will be expected to quickly put these suggestions into action after finalisation next year.

In the meantime, the European Union has hurriedly advanced its Markets in Crypto Assets (MiCA) law and unveiled “embedded oversight” for decentralised finance projects.

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