Recommendations for “consistent and comprehensive” regulation of the industry were realized by the Financial Stability Board (FSB), which consists of regulators from important countries including the US, EU, China, and the UK. International standard-setters have demanded tougher regulations to protect Bitcoin consumers’ funds and avoid conflicts of interest in the sector.
Numerous accusations of unethical activity in the cryptocurrency industry over the previous stormy year led to the FSB’s recommendations. The objective is to address crypto-assets’ volatility and structural weaknesses following misconduct allegations against FTX and Celsius.
The FSB may require major crypto conglomerates to segregate some activities and functions to comply with the new standards. FTX, which declared bankruptcy in November, has come under fire for purported wrongdoing. Legal issues arose for Celsius as authorities detained its co-founder and ex-CEO, Alex Mashinsky, for alleged misconduct.
The FSB made suggestions to strengthen and harmonize the worldwide regulatory environment for the Bitcoin market. The sudden demise of the terraced stablecoin in May 2022, the recent failure of crypto-focused institutions, and the de-pegging of Circle’s USDC stablecoin have all highlighted the need for such laws.
Various global regulatory frameworks for cryptocurrencies exist. The SEC in the US aims to apply traditional financial regulations to cryptocurrencies. Meanwhile, the EU introduces the Markets in Crypto Assets (MiCA) regulation, a tailored approach for digital assets.
Financial Institutions’ Support and Market Concerns
The FSB’s guiding principles are created to take into account these various strategies and offer an industry-wide framework that is adaptable but thorough. Officials stress the need for continuity in regulation, as crypto asset operations are similar to conventional financial instruments.
According to FSB Secretary General John Schindler, the global framework does not fully rewrite the regulatory landscape for digital assets. Instead, it seeks to create expectations and standards that are consistent with conventional financial methods. Even though authorities are working to put these norms into place, he urged all participants in the crypto asset market to start abiding by them right away.
The final recommendations of the FSB were created after discussion with numerous parties. Traditional financial institutions backed stronger crypto regulations, while Binance and Coinbase expressed concerns about stifling innovation.
The challenge lies in balancing consumer safety and fostering innovation in the evolving crypto industry. Regulators globally are closely monitoring its development and impact. The FSB’s proposals aim to provide a clear path for global cryptocurrency regulation. This clarity will benefit both industry participants and users.