Many stablecoins are lagging behind upcoming regulatory recommendations, FSB chairman says
Many stablecoins are lagging behind upcoming regulatory recommendations, FSB chairman says
#stablecoins #lagging #upcoming #regulatory #recommendations #FSB #chairman Welcome to InNewCL, here is the new story we have for you today:
Click Me To View Restricted Videos
Financial Stability Board (FSB) Chair Klaas Knot set out how the organization intends to respond to key threats to financial stability this year in a letter to G20 finance ministers and central bank governors on 20 February. Crypto assets and decentralized finance (DeFi) took a prominent place on the list of challenges the FSB saw. The group of G20 ministers and bankers will meet in Bengaluru, India on 24-25 February.
The FSB has an “ambitious work program” to finalize a regulatory framework for crypto assets in 2023, Knot said. The FSB is an advisory body created by the G20 and affiliated with the Bank for International Settlements (BIS). It has no enforcement powers.
The FSB indicated in a Feb. 16 report that it is increasing its attention to DeFi given its potential ties to traditional finance. Now, Knot said, the recommendations in the evolving framework could bode ill for some stablecoins:
“Importantly, the FSB’s work concludes that many existing stablecoins would not currently comply with these high-level recommendations, nor with international standards and supplemental, more detailed guidance from the BIS Committee on Payments and Market Infrastructures of the International Organization of Securities Commissions.”
Guidance released in July by the BIS and the International Organization of Securities Commissions extends the “equal risk, equal regulation” principles for financial market infrastructure to stablecoins. These principles were released in 2012 in response to the 2008 financial crisis.
The FSB provides an overview of future global standards for stablecoins.
Stablecoins and other crypto assets are increasingly the focus for the Financial Stability Board (FSB).
The head of the FSB stated that many stablecoins currently in use do not meet global standards, it… pic.twitter.com/EG4UM1fyhN
— Web3 Daily (@web3_247) February 20, 2023
After the FSB released its final recommendations for regulatory and supervisory approaches to crypto assets and stablecoins in July, the board will make recommendations to certain standard-setting bodies and oversee their implementation.
Related: Financial Stability Board aims to address crypto-related risks after FTX collapse
Knot wrote: “Appropriate regulation of crypto assets based on the principle of ‘equal activity, equal risk, equal regulation’ will provide the beginning of a strong foundation for realizing the potential benefits of this form of financial innovation while limiting its risks.”
The letter noted that one of the drivers of crypto asset growth was “dissatisfaction with the existing system of cross-border payments.” It added that the FSB will present a report on the next steps in the G20 roadmap to improve cross-border payments at the upcoming meeting.
