On July 11, the Financial Stability Board (FSB) published a letter sent to G20 finance ministers and central bank governors outlining concerns over the rapid growth in crypto-assets and vulnerabilities facing the global financial system. The letter highlighted the following:
- Crypto-assets, including so-called stablecoins, are fast-evolving.
- Crypto-assets and markets must be subject to effective regulation and oversight commensurate to the risks they pose, both at the domestic and international level.
- Crypto-asset service providers must at all times ensure compliance with existing legal obligations in the jurisdictions in which they operate.
- The recent turmoil in crypto-asset markets highlights the importance of progressing ongoing work of the FSB and the international standard-setting bodies to address the potential financial stability risks posed by crypto-assets, including so-called stablecoins.
- Stablecoins should be captured by robust regulations and supervision of relevant authorities if they are to be adopted as a widely used means of payment or otherwise play an important role in the financial system.
- FSB members support the full and timely implementation of existing international standards.
- The FSB is working to ensure that crypto-assets are subject to robust regulation and supervision.
The FSB will report to the G20 Finance Ministers and Central Bank Governors in October on regulatory and supervisory approaches to stablecoins and other crypto-assets
Putting It Into Practice: This latest FSB letter attempts to make it clear that crypto is now mainstream and regulators need to take urgent action to address the potential risks to other areas of the global economy. Recent congressional examination highlights a similar need for an effective U.S. regulatory framework to ensure that crypto-asset activities posing risks similar to traditional financial activities are subject to the same regulatory outcomes (we discussed these examinations in previous blog posts here and here).