FSB to Enhance Monitoring of DeFi-Specific Vulnerability Indicators

The Financial Stability Board (FSB) is stepping up its monitoring of crypto-assets and decentralized finance (DeFi).

During its Monday and Tuesday (Dec. 5 and 6) meeting in Basel, Switzerland, the FSB Plenary — which includes national authorities responsible for financial stability in 24 countries and jurisdictions — said it will enhance its monitoring to include DeFi-specific vulnerability indicators, according to a Dec. 6 press release .

“Within the crypto-asset ecosystem, DeFi has emerged as a fast-growing segment, covering a variety of services in crypto-asset markets that aim to replicate some functions of the traditional financial system,” FSB said in the release. “The Plenary discussed the financial stability implications of DeFi and areas that merit further attention.”

The group also discussed the broader crypto-asset markets, determining that while the financial stability risks from the 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, according to the press release.

It said in the release that members stressed the importance of addressing crypto trading platforms’ potential for concentrations of risk, conflicts of interest and misuse of client assets.

“The Plenary emphasized the importance of ongoing vigilance and the urgency of advancing the policy work program by the FSB and the standard-setting bodies to establish a global framework of regulation and supervision, including in non-FSB member jurisdictions,” the release said.

This news comes about three weeks after Steven Maijoor, the head of the FSB’s working group on crypto assets, said that the ongoing turmoil in the crypto world has given the FSB a new reason to develop regulations for the industry.

In his Nov. 17 remarks at the Institutional Digital Assets and Crypto Regulation Symposium organized by City & Financial Global in London, Maijoor said they would “soon reach a point where they represent a threat to the stability of the global financial system,” CoinDesk reported at the time.