Traditional Finance Firms Say FSB Should Pursue Tough Crypto Rules

Traditional finance companies are reportedly urging the Financial Stability Board (FSB) to pursue tough rules for the cryptocurrency sector.

The companies said so in response to the FSB’s invitation to comment on its proposed international crypto rulebook aimed at promoting financial stability and consumer protection, CoinDesk reported Wednesday (Jan. 4).

The FSB posted more than 40 public responses to its proposed framework for the international regulation of crypto-asset activities on Wednesday.

On the web page on which they are posted, FSB said the framework includes recommendations for the regulation, supervision and oversight of both crypto-asset activities and markets and “global stablecoin” arrangements.

According to the CoinDesk report, some of the public comments suggested extending the regulatory perimeter, clarifying how to segregate and protect customer assets, and require separation of activities — applying the same standards that are applied to traditional finance players.

Some crypto firms submitting public comments cautioned the FSB about the potential of slowing innovation. They said crypto risks require tailored regulation and combined services allow real-time settlement without meaningful extra risks.

When posting the public comments, the FSB said that it expects to publish its final reports in July.

The FSB said Dec. 6 that it is stepping up its monitoring of crypto-assets and decentralized finance (DeFi) and enhancing it to include DeFi-specific vulnerability indicators.

The group also discussed at a Dec. 5 and Dec. 6 meeting the broader crypto-asset markets and determined that while the financial stability risks from turmoil in these markets remain limited, that may change as the links between crypto-asset firms and core financial markets and institutions continue to grow.

Members of FSB stressed the importance of addressing crypto trading platforms’ potential for concentrations of risk, conflicts of interest and misuse of client assets.

Weeks earlier, on Nov. 17, the head of the FSB’s working group on crypto assets, Steven Maijoor, said during a speech that the ongoing turmoil in the cryptocurrency world has given the FSB new reason to develop regulations for the industry and that the rapid growth of the crypto market, coupled with structural vulnerabilities and a lack of regulations means they will “soon reach a point where they represent a threat to the stability of the global financial system.”

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