The call for global digital asset regulation intensifies, with the Financial Stability Board (FSB) advocating for a stringent policy that ensures utmost safety for user assets. This international financial body, known for setting the standards, formulates recommendations intended to thwart the tumultuous waves endured by the crypto markets in the previous year. The fundamental basis of this appeal revolves around the credo of “same activity, same risk, same regulation.”
The FSB’s proposed regulatory framework principally targets virtual assets and stablecoins. The members of the G20 leading economies have been acquainted with this set of rules, delineated into “high-level recommendations” and “revised high-level recommendations for a global stablecoin.” The suggested regulations emphasize the need to separate user assets from the assets owned by the platform to eliminate conflicts of interest and promote regulatory auditing and transparency.
Unsettling instances from the past year, specifically the dissolution of the crypto-oriented enterprises like FTX and Terra, along with the momentary de-pegging of USD Circle (USDC), highlight the perils associated with commingling user funds. These precedents underscore the urgency to solidify stablecoin regulations, thus dodging future threats.
It is noteworthy that Central Bank Digital Currencies (CBDCs) have been exempted from these guidelines, attributed to their substantially lower risk factors as compared to other crypto assets.
Stablecoins, notably the global ones operative in various jurisdictions, have been singled out for a regulatory elevation. The FSB insists upon mandatory permits for stablecoin issuers within their significant jurisdiction, urging them to adhere to all regulatory, supervisory, and oversight requisites.
Moreover, stablecoin issuers must establish an identifiable legal body or “governance group” to ensure accountability. Whether holding 1:1 reserve assets or being potentially subject to all the requirements imposed on banks, the initiative aims to prevent stablecoins from losing their pegs.
In conclusion, the institutions are advised to fully comply with crypto firms regarding disclosure and demand meticulous scrutiny from regulatory bodies. The authorities must be granted access to necessary data to fulfill their regulatory, supervisory, and oversight mandates. While such reforms might slow down some activities within the crypto space, they certainly point towards a safer and more transparent ecosystem for all participants.
Source: Cryptonews
