Regulating cryptos: FSB recommends framework 

  • July 18, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Regulating cryptos: FSB recommends framework 

Subject :Economy

Section: External sector

In News: The Financial Stability Board (FSB) has come out with a 9-point recommendation for regulating crypto assets. It has recommended that crypto-asset issuers and service providers should have a comprehensive governance framework with clear and direct lines of responsibility and accountability for all functions and activities.

Key Points:

  • FSB was asked by G20 to suggest a regulatory framework. The recommendations are contained in ‘FSB Global Regulatory Framework for Crypto-asset Activities’.
  • This framework is based on the principle of ‘same activity, same risk, same regulation’ and provides a strong basis for ensuring that crypto-asset activities and so-called stablecoins are subject to consistent and comprehensive regulation, commensurate to the risks they pose.
  • FSB is an international body that monitors and makes recommendations about the global financial system.
  • Final recommendations draw on the implementation experiences of jurisdictions and build on the principles – ‘same activity, same risk, same regulation’
  • Strengthened recommendations areas such as ensuring adequate safeguarding of client assets, addressing risks associated with conflicts of interest, and strengthening cross-border cooperation.
  • Which Risks are addressed ?
    • Focus on addressing risks to financial stability only.
    • And do not comprehensively cover all other specific risk categories related to crypto-asset activities such as Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT); data privacy; cyber security etc.
  • Central Bank Digital Currencies envisaged as digitalised central bank liabilities, not subject to these recommendations.
9 Recommendations for the Regulation, Supervision and Oversight of Crypto-asset 

  1. Regulatory powers and tools
  2. General regulatory framework
  3. Cross-border cooperation, coordination and information sharing
  4. Governance
  5. Risk management
  6. Data collection, recording and reporting
  7. Disclosures
  8. Addressing financial stability risks arising from interconnections and interdependencies
  9. Comprehensive regulation of crypto-asset service providers with multiple functions
Financial Stability Board

  • The Financial Stability Board is an international body that monitors and makes recommendations about the global financial system. It was established after the G20 London summit in April 2009 as a successor to the Financial Stability Forum with a broadened mandate to promote financial stability.
  • It comprises several central banks, ministries of finance, and supervisory and regulatory authorities from 25 jurisdictions, as well as 10 international organizations and six Regional Consultative Groups (RCGs).
  • India as a member of the FSB has three seats in its Plenary represented by Secretary (EA), Deputy Governor-RBI and Chairman-SEBI. Regular interaction with FSB takes place through periodic conference calls and meetings. Information is exchanged with FSB member jurisdictions frequently as per international requirements.
  • Mandate:
    • The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies
    • To develop and promote the implementation of effective regulatory, supervisory and other financial sector policies.
    • Through its members FSB seeks to strengthen financial systems and increase the stability of international financial markets.
  • Details:
    • It is headquartered in Basel, Switzerland.
    • The board includes all G20 major economies.
    • The FSB consists of 68 member institutions.
economy Regulating cryptos: FSB recommends framework