G20 Coalition Working On ‘Robust’ Crypto Regulations, Proposal Likely By October 2022

The Financial Stability Board (FSB) of G20 on Monday (July 11) said that it is working on ‘robust’ global regulations for crypto-assets. The FSB further noted that the said rules will be proposed by October this year. 

“The FSB is working to ensure that crypto-assets are subject to robust regulation and supervision. The FSB will report to the G20 Finance Ministers and Central Bank Governors in October on regulatory and supervisory approaches to stablecoins and other crypto-assets,” the FSB said in a statement.

The FSB is an international body comprising central bank governors from across G20 economies, including India. The panel had so far shied away from regulating the crypto space, saying it did not pose a systematic risk. 

It is pertinent to note that the FSB is a non-binding body and does not have the right to enforce rules.

Crypto-assets and markets should be subject to effective regulation and oversight commensurate with the risks they pose both at the domestic and international level, the FSB said in the statement.

It also said that any forms of stablecoin entering the mainstream across multiple jurisdictions could pose significant risks to financial stability in the absence of regulations. It called for maintaining high regulatory and transparency standards for such stablecoins to adhere to global norms.

The FSB also said that it is working with global bodies such as the Financial Action Task Force (FATF) on the ‘supervision’ of ‘unbacked’ crypto-assets and ‘stablecoins’. Besides, it is also analysing the implications of Decentralised Finance (DeFi) on financial stability.

The FSB said that the current turmoil in crypto markets highlights their ‘intrinsic volatility, structural vulnerabilities and increasing interconnectedness with the traditional financial system’.

The statement also noted that the market volatility in the crypto space could have spill-over effects on the traditional financial systems that could pose major risks. 

The global body also urged all crypto exchanges to comply with all local laws before commencing operations in a particular territory. 

“FSB members are committed to using the enforcement powers within the legal framework in their jurisdiction to promote compliance and act against violations,” it said.

The statement comes at a time when cryptocurrencies are witnessing a bearish trend, losing billions of dollars of investors’ wealth. The world’s largest cryptocurrency Bitcoin has tanked close to 70% from an all-time high of $69,000 in November last year to $20,495.30.

In addition, the Luna crash in May spooked investors, while the subsequent developments saw cryptocurrency asset hedge fund Three Arrows Capital file for bankruptcy due to its heavy investments in Luna.

Earlier this month, asset-backed lending and borrowing platform Vauld suspended operations due to ‘significant customer withdrawals.’ Prior to that, even big crypto exchanges such as CoinSwitch Kuber and CoinDCX had disabled crypto as well as fiat withdrawals. 

The FSB’s announcement comes at a time when Indian ministers and officials have continued to seek global crypto regulations to curb usage of cryptocurrencies for terrorism and money-laundering.

In April, Finance Minister Nirmala Sitharaman, while addressing the International Monetary Forum, sought an ‘adept and nimble technology-based global regulatory regime’ in the crypto domain.

Later in June, Reserve Bank of India (RBI) Governor Shaktikanta Das called for a globally coordinated regulatory approach towards blockchain technology.