The Financial Stability Board (FSB), an international organization responsible for monitoring the global financial system, has finalized recommendations for a global regulatory framework for cryptocurrencies. These guidelines have been proposed to the G-20 economies and are based on the principle of “same activity, same risk, same regulation.” The FSB’s recommendations aim to address potential conflicts of interest, ensure the segregation of client assets from platform funds, and promote cross-border cooperation among regulators.
In its public note, the FSB outlined two sets of recommendations. The first set focuses on regulating cryptocurrencies in general, while the second set specifically addresses global stablecoins. For the latter category, which includes stablecoins used across multiple jurisdictions, the FSB highlights the need for stablecoin issuers to establish identifiable and responsible legal entities or individuals, commonly referred to as a “governance body.” Moreover, these issuers should maintain reserve assets in a minimal 1:1 proportion, unless they meet adequate prudential requirements similar to those applicable to commercial banks.
Notably, the FSB suggests that global stablecoin issuers may be required to obtain permits to operate in individual jurisdictions. The guidelines state that authorities should only permit the operation of a global stablecoin arrangement within their jurisdiction if it complies with all relevant regulatory, supervisory, and oversight requirements, including obtaining affirmative approval.
Privacy is also a concern addressed by the FSB, which acknowledges that decentralized finance (DeFi) protocols can sometimes hinder the identification of responsible entities. To tackle this, local regulators must ensure that there are no activities frustrating the identification of such entities while still allowing authorities to access necessary data for regulatory purposes.
By the end of 2025, the FSB plans to review the implementation of its recommendations worldwide and will collaborate with the International Monetary Fund (IMF) to deliver a joint report on existing policies and regulatory issues to the G-20 in September 2023.
These developments have caught the attention of the Association for Financial Markets in Europe (AFME), which has urged European Union lawmakers to include decentralized finance (DeFi) within the first pan-EU crypto framework, citing the FSB’s perspective.
Overall, the FSB’s finalized recommendations aim to create a comprehensive global regulatory framework for cryptocurrencies, with a particular focus on stablecoins. These guidelines emphasize the need for segregation of assets, conflict of interest avoidance, cross-border cooperation, and responsible governance in the evolving crypto landscape.