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Financial Stability Board Releases Global Regulatory Framework for Crypto: Privacy, Governance, and Implementation Review

Financial Stability Board Releases Global Regulatory Framework for Crypto

The Financial Stability Board (FSB), an international organization that monitors the global financial system, has released a global regulatory framework for crypto. The framework includes guidelines for regulating crypto in general and “global stablecoins.” The FSB emphasizes the need for crypto platforms to segregate client assets from their own funds and separate multiple functions to avoid conflicts of interest. Regulators are also urged to ensure cross-border cooperation to prevent platforms from evading oversight.

Privacy and Governance in Focus

The FSB’s guidelines also address privacy concerns and governance requirements. Local regulators are expected to prevent activities that hinder the identification of responsible entities, particularly in decentralized finance (DeFi) protocols. For global stablecoins, the FSB emphasizes the need for identifiable and responsible legal entities or individuals, as well as reserve assets held in a 1:1 minimal proportion. Issuers may also be required to obtain permits to operate in each jurisdiction.

Implementation and Review

The FSB plans to review the implementation of its recommendations worldwide by the end of 2025. In September 2023, a joint report on policies and regulatory issues will be delivered to the G20 by the FSB and the International Monetary Fund (IMF). The release of this global regulatory framework follows calls from the Association for Financial Markets in Europe (AFME) to include decentralized finance (DeFi) in the EU’s crypto framework.

Hot Take: FSB Sets the Stage for Global Crypto Regulations

The Financial Stability Board’s release of a global regulatory framework for crypto is a significant step towards establishing consistent regulations across jurisdictions. By addressing issues such as asset segregation, conflict of interest, privacy, and governance, the FSB aims to ensure a safer and more transparent crypto ecosystem. However, the requirement for permits in each jurisdiction may pose challenges for global stablecoin issuers. Overall, this framework sets the stage for global cooperation and oversight in the crypto space.

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