The Financial Stability Board (FSB) issued a recommendation on Tuesday calling for stronger rules to protect client assets and avoid conflicts of interest after a spate of suspected fraud over the past year.
FTX and Celsius allegations are the background
The FSB consists of regulators from about 20 countries, including the United States, the European Union (EU), China, and the United Kingdom. The published recommendations are to ensure “consistent and comprehensive” regulation in this area. Based on a proposal announced in October 2022, the type of conduct purportedly carried out by companies such as the failed cryptocurrency exchange FTX and crypto lending firm Celsius Network. focus on preventing
“The events of the past year have highlighted the inherent volatility and structural vulnerabilities of crypto assets and related players,” the FSB said in a statement. This norm could force major crypto conglomerates to separate some of their activities and functions.
FTX, which filed for bankruptcy in November 2022, has faced a series of allegations of inadequate recordkeeping and the unauthorized use of customer funds. Meanwhile, Celsius co-founder and former CEO Alex Mashinsky, who was arrested in New York on the 13th, has been accused of misleading investors and manipulating the token price for personal gain. has been charged, but has pleaded not guilty.
When explaining the rationale for tightening global rules, the FSB pointed out the recent bankruptcies of banks specializing in crypto assets, such as Silicon Valley Bank, and two months ago, Circle’s stablecoin USD coin ( USDC) was de-pegged for a short period of time, and the sudden collapse of the algorithmic stablecoin TerraUSD (UST) in May 2022, which marked the return of cryptocurrency winter.
Different global approaches
Major global players are regulating cryptocurrencies with different approaches. While the EU is enacting a new, purpose-built law known as the Crypto Asset Market Control Act (MiCA) regulation, the US Securities and Exchange Commission (SEC) has decided that it was designed 100 years ago for traditional financial instruments. We believe that existing rules can be applied.
In theory, the FSB’s principles should be flexible enough to apply to both approaches, but the FSB intends to emphasize continuity.
“This global framework does not rewrite or create entirely new rules for regulating cryptoassets,” FSB Secretary General John Schindler told reporters. “The activity around it is not as different from traditional financial activity as some might think, and the same rules should apply.”
“We encourage all cryptocurrency players to begin complying with these basic expectations and standards now, while their respective jurisdictions work to enforce them,” Schindler said.
The recommendations were issued after consultation. The talks see traditional financial firms pushing for tighter controls over cryptocurrencies, while firms such as major crypto exchanges Binance and Coinbase will be constrained from innovation by stricter rules. He sounded the alarm that it was possible.
｜Editing: Rinan Hayashi
｜Original: Financial Stability Board Calls for Tougher Global Crypto Rules After Year of Turmoil