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The Financial Stability Board (FSB), an international organization overseeing the global financial system, has concluded its recommendations for a global regulatory framework for cryptocurrencies. The guidelines, presented to the G20, the world’s leading economies, are based on the principle of “same activity, same risk, same regulation.”
On July 17, the FSB released a public note and two separate guideline documents. The recommendations include high-level guidelines for regulating cryptocurrencies in general and revised high-level recommendations specifically addressing global stablecoins, which refers to stablecoins with cross-jurisdictional usage.
According to the FSB, crypto platforms must ensure the segregation of clients’ digital assets from their own funds and establish clear functional separation to avoid conflicts of interest. Regulators are responsible for ensuring strong cross-border cooperation and oversight.
The FSB also acknowledges the importance of privacy and highlights the need for local regulators to prevent activities that may hinder the identification of responsible entities, including decentralized finance (DeFi) protocols. One of the high-level recommendations emphasizes regulatory authorities’ access to necessary data for fulfilling their regulatory and supervisory mandates.
Regarding global stablecoins, the FSB underscores the requirement for stablecoin issuers to have identifiable and responsible legal entities or individuals constituting a “governance body.” It states that issuers should maintain reserve assets in a minimal 1:1 proportion, unless they are subject to adequate prudential requirements comparable to those imposed on commercial banks.
One notable aspect is the potential obligation for global stablecoin issuers to obtain operating permits in each jurisdiction. The guidelines stipulate that authorities should only permit the operation of a global stablecoin arrangement if it meets all regulatory, supervisory, and oversight requirements of the respective jurisdiction, including obtaining affirmative approval.
The FSB will review the global implementation of its recommendations by the end of 2025. In September 2023, in collaboration with the International Monetary Fund, it will deliver a joint report to the G20 on existing policies and regulatory issues.
Earlier in July, the Association for Financial Markets in Europe referenced the FSB’s position and urged European Union lawmakers to incorporate decentralized finance (DeFi) into the first EU-wide crypto framework.
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