The globally agreed rules leave cryptocurrency companies no choice but to introduce basic safeguards to prevent bankruptcies like the one we saw on the FTX exchange and other cryptocurrency losses, the G20 Financial Stability Board (FSB) said.
As Reuters notes, the FSB yesterday (Monday) published the final recommendations requested by the G20 on the oversight of companies trading cryptocurrencies such as Bitcoin.
The Board also revised its existing recommendations for stablecoins. The focus is on strong governance to avoid conflicts of interest, proper risk management and disclosures to ensure that customer money is segregated from company cash.
“As recent events have shown, if the links to traditional finance are to grow further, transfers from cryptocurrency markets to the wider financial system could increase,” the FSB said.
The collapse of FTX in November 2022 highlighted vulnerabilities in cryptocurrency companies and the FSB said all countries should implement the recommendations, even those that are not members. FTX was based in the Bahamas, which is not a member of the FSB.
“Therefore, cryptocurrency players must stop operating outside the regulatory perimeter or in non-compliance with existing rules,” FSB Secretary General John Schindler told reporters.
The FSB is made up of representatives of authorities including the European Central Bank, the Bank of England and the US central bank.
“These players can no longer argue that there is a lack of regulatory clarity, as our framework makes clear the standards that should apply,” said Schindler.
The European Union has already adopted the world’s first comprehensive set of rules for cryptocurrency markets, but the FSB’s minimum “global baseline” standards are designed to accommodate countries that want to go further.
The FSB, whose members are committed to implementing the agreed rules, will review how they are implemented by the end of 2025.
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