The Financial Stability Board (FSB) has published a peer review that finds major gaps, and inconsistencies in implementing the FSB Global Framework for Crypto-Asset Activities, which it warns could present risks to financial stability, and the growth of a resilient digital asset ecosystem.
The Thematic Peer Review on the FSB Global Regulatory Framework for Crypto-asset Activities, highlights that jurisdictions have progressed in regulating crypto-asset activities, and to a smaller degree global stablecoin arrangement (GSCs).
The peer review focused on evaluating progress in enacting the FSB’s 2023 global framework, encompassing recommendations on crypto-asset service providers, stablecoin arrangements, data reporting and collection, and cross-border cooperation and coordination.
It highlighted the significant gaps and inconsistencies that could lead to risks to financial stability, and fostering a resilient digital asset ecosystem.
The review urges the FSB and its member jurisdictions to focus on completing regulatory frameworks for GSCs, and aligning them with FSB recommendations, particularly in connection to stablecoin arrangements, and crypto-asset service providers.
It puts forward recommendations to target outstanding issues related to implementation progress, comprehensiveness, and consistency, and cross-border cooperation and coordination.
The review asks jurisdictions to prioritise full and consistent implementation, to reduce the risk of regulatory arbitrage, and to better the oversight of an inherently global crypto-asset market.
It comes against a backdrop of a rapidly changing crypto-asset market and regulation.
Artur Yuen, deputy chief executive of the Hong Kong Monetary Authority, and chair of the team that released the report, comments: “Implementation progress remains incomplete, uneven and inconsistent. This creates opportunities for regulatory arbitrage and complicates oversight of the inherently global and evolving crypto-asset market.”
Nick Jones, founder and CEO, Zumo, adds: “It’s worth noting the FSB has said financial stability risks are ‘limited at present’, so while this isn’t something to panic about, it does underline the importance of implementing the right regulatory regimes that foster the responsible growth of the sector.”
“We’ve seen a number of encouraging developments recently, such as the creation of a Transatlantic Taskforce aimed at enhancing US-UK collaboration around digital asset regulation and exploring ways to reduce cross-border burdens on both sides of the pond. This is the type of initiative that can help to address gaps in rules that are currently out of sync with the borderless nature of the industry.
“It also provides a good example for others to follow, including policymakers across the European Union . The EU’s Markets in Crypto Assets regulation is fragmenting rapidly as a result of differences in how national competent authorities are interpreting and then applying the rules, leading to inconsistent licensing, supervision, and enforcement across multiple member states.”
“The world’s regulatory authorities and policymakers need to start working together more closely, sharing knowledge and examples of good practice. They can also draw on the experiences of firms keen to help — many across the industry have been calling loudly for new legislation that lays the foundations for growth while ensuring appropriate guardrails are in place to protect consumers.”
The International Organisation of Securities Commissions (IOSCO) also disclosed the results of a thematic review of the implementation of IOSCO’s Crypto and Digital Asset framework.
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