The Financial Stability Board seems concerned about the cryptocurrency market, given the recent fluctuations and the "growing interconnection with the traditional financial system"
• The Financial Stability Board (FSB), a global financial regulator that includes all G20 countries, is preparing to propose international regulation for cryptocurrencies and stablecoins.
On Monday, the FSB issued a statement on the international regulation and oversight of cryptocurrency-related activities, announcing a major regulatory effort.
The supervisory body plans to submit in October 2022 – to G20 finance ministers and central bank governors – a report on the regulatory and supervisory approaches of stablecoins and other crypto assets. By that date, the FSB intends to present a public consultation report on the revision of the recommendations, including "how existing frameworks can be expanded to fill in the gaps and implement the high-level guidance."
The G20 authority also plans to present another report proposing guidance to promote global consistency regarding regulatory and supervisory approaches to other crypto-assets:
"These joint efforts by the FSB and the international standards-setting bodies aim to minimize the risk of regulatory fragmentation and arbitrage."
According to the statement, the FSB's growing interest in regulation is due to the recent downturn in cryptocurrency markets. Market turmoil has highlighted the issue of the "growing interconnectedness of cryptocurrencies with the traditional financial system," the regulator said.
The FSB argues that it "could have spillover effects on important sectors of traditional finance, such as short-term financing markets," adding that global regulators must oversee cryptocurrency markets in line with the principle of "same activity, same risk, same regulation."
Therefore, a stablecoin that enters the mainstream of the financial system must comply with "high standards of regulation and transparency, maintain at all times the reserves that preserve the stability of value and meet the relevant international requirements," the FSB explained.
The FSB's plan to propose a unified global regulation on stablecoins is quite a challenging task, according to some industry executives.
Narek Gevorgyan, CEO of CoinStats, pointed out that the FSB has no legislative powers, but intends to include cryptocurrencies in the already existing legal frameworks of the participating countries. In a statement released to Cointelegraph, Gevorgyan questioned the regulator's ability to include all regulatory aspects and protocols:
"Existing legal frameworks can help regulate speculative aspects of the market and centralized exchanges, but how does the FSB plan to complement the hundreds of existing and emerging protocols that are designed to withstand regulation?"
In February of this year, the FSB had already pointed out the multiple risks arising from the cryptocurrency sector. The authority was particularly concerned about the potential failure of some stablecoins, the issue of missing information in the cryptocurrency industry, and the potentially dangerous outcomes of the rapid growth of decentralized finance.