Global rules leave crypto firms with no place to hide, says G20 watchdog

By Huw Jones

LONDON (Reuters) – Globally agreed rules leave crypto firms no choice but to introduce basic safeguards to prevent blowouts seen on the FTX exchange and other crypto losses, the G20 Financial Stability Board said on Monday.

The FSB on Monday released final recommendations requested by the G20 on oversight of companies that trade in crypto-assets such as bitcoin. The watchdog has also revised its existing recommendations for stablecoins in light of the demise of TerraUSD/Luna coins.

Both borrow universal safeguards from traditional finance before the sector grew large enough to pose a threat to financial stability by focusing on strong governance to avoid conflicts of interest, and risk and liability management. appropriate disclosures to ensure customer money is segregated from company cash.

“As recent events have illustrated, if ties to traditional finance were to grow further, the spillover from crypto-asset markets to the broader financial system could increase,” the FSB said.

The collapse of FTX in November 2022 highlighted the vulnerabilities of crypto firms and the FSB said all countries should implement the recommendations, even those that are not members of the watchdog. FTX was based in the Bahamas and was not a member of the FSB.

“Therefore, crypto-asset players must stop operating outside the regulatory perimeter or in violation of existing rules,” FSB Secretary General John Schindler told reporters.

“These players can no longer argue that there is a lack of regulatory clarity, as our framework clarifies the standards that should apply.” said Schindler.

Bitcoin soared to 13-month highs as the sector recovers from last year’s rout, buoyed by a historic legal victory for Ripple Labs Inc on Thursday, which had challenged regulators over the extent to which the tokens should fall under US securities law.

The European Union has already approved the world’s first comprehensive set of rules for crypto-asset markets, but the FSB’s “global core” minimum standards are designed to accommodate jurisdictions that want to go further.

The FSB standards are expected to be made more granular by additional measures from the Basel Committee and IOSCO, the global banking and securities watchdogs.

IOSCO in May proposed the first comprehensive approach to regulating the day-to-day operations of the crypto market.

The FSB, whose members pledge to apply the agreed standards, will review their implementation by the end of 2025.

(Reporting by Huw Jones, editing by Louise Heavens)

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