The Financial Stability Board (FSB), an international agency that oversees the global financial system, has developed a global regulatory framework for cryptocurrency. The G20 recommendations, which are proposed to the world’s 20 top economies, are based on the idea of “same activity, same risk, and same regulation.”
To minimize conflicts of interest, crypto platforms must isolate clients’ digital assets from their own finances and clearly separate functions, according to the FSB, with regulators assuring close cross-border collaboration and control.
The international body is very open about its respect for privacy, requiring local regulators to ensure that there is no conduct that “may frustrate the identification of the responsible entity or affiliated entities,” referring to DeFi protocols. According to one of the high-level suggestions, “authorities should have access to data as necessary and appropriate to fulfill their regulatory, supervisory, and oversight mandates.”
Concerning so-called global stablecoins, the FSB emphasizes the need for each stablecoin issuer to have one or more identifiable and responsible legal entities or individuals known as a “governance body.” It states that issuers must retain reserve assets at a 1:1 minimum proportion unless the issuer “is subject to adequate prudential requirements” similar to commercial bank standards.
By the end of 2025, the FSB will assess how well its suggestions are being implemented around the world. It will present a joint report to the G20 in September 2023, along with the International Monetary Fund, on existing policies and regulatory challenges. The Association for Financial Markets in Europe referenced the FSB stance in early July, encouraging European Union lawmakers to include the category of DeFi in the first EU-wide directive.
