December 4, 2023
By Anjali Kochhar
In a groundbreaking move to fortify the integrity of the cryptocurrency sector, the Financial Stability Board (FSB) has unveiled a far-reaching report proposing stringent global regulations. Released on November 28, 2023, the report specifically targets Multifunction Crypto-asset Intermediaries (MCIs), including industry giants like Binance and Coinbase.
The FSB underscores the consolidation of diverse services within MCIs, such as trading platforms, crypto-assets holding, and market making, as a departure from traditional finance norms. The core principle of ‘same activity, same risk, same regulation’ is challenged by this amalgamation, prompting the FSB to address potential regulatory gaps.
Key recommendations outlined in the report include an in-depth assessment, in collaboration with standard-setting bodies, of whether existing recommendations adequately cover the risks tied to MCIs’ multifaceted functions. The concern revolves around potential additional policy measures needed due to combinations that are typically restricted in traditional finance.
Recognising the global reach and intricate structures of MCIs, the FSB emphasises the imperative need for enhanced international cooperation and information sharing. This proactive approach aims to thwart MCIs from exploiting regulatory loopholes by operating from jurisdictions with lax regulations.
Addressing significant information gaps in disclosure and reporting practices of MCIs is also a focal point. The report highlights the hindrance these gaps pose to effective market oversight and risk assessment, prompting the FSB to consider the necessity of additional policy measures for comprehensive and transparent reporting.
In response to the FSB’s recommendations, the G20, representing the world’s 20 largest economies, has initiated the implementation of a global crypto framework. This framework, developed in collaboration with the International Monetary Fund (IMF) and completed in July, serves as a regulatory roadmap endorsed by the G20.
These proposed regulations signify a pivotal shift toward heightened oversight and standardisation in the cryptocurrency industry. By aligning crypto-asset activities with traditional financial regulations, the FSB aims to mitigate risks associated with wire frauds and scams, ultimately enhancing the overall stability and integrity of the global financial system.
The FSB’s latest report signals an escalating focus and regulatory commitment to the cryptocurrency sector, offering crucial guidelines as the industry continues to evolve.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
