It Financial Stability Board (FSB) has a global regulatory framework proposed for crypto. The framework was made public on July 17 and includes new recommendations for cryptos in general, and for stablecoins.
What is the Financial Stability Board?
The FSB is an international organization that monitors the global financial system. The organization aims to promote financial stability by strengthening the coordination of national financial authorities and international standardization bodies. It also deals with cryptocurrencies since the technology has become more widely adopted.
FSB proposes 2 rules
The FSB proposal suggests that crypto exchanges clearly separate their own funds from those of their clients. If this fact is not properly observed, a potential conflict of interest arises. FTX and Celsius are good examples of crypto platforms where this has gone wrong. To prevent this, regulators must have the ability to access the data.
The other recommendation from the FSB has to do with stablecoins. Here too we have seen that the lack of regulation has caused problems. With Tether (USDT), it is still unclear whether there is actually a dollar for each USD token. A year ago, the Terra (LUNA) stablecoin, called TerraUSD (UST), fell dramatically. In response, the proposed regulation of the FSB proposes that at least 1 legal or government institution should be responsible. In addition, the underlying token must have a minimum 1:1 ratio of reserves.
FSB follows EU with crypto regulations
The FSB is not the first body to try to draw up clear regulatory frameworks. The European Union (EU) has been busy for some time now. The new legal framework called Market in Crypto Assets (The EU’s MiCA went into effect on May 31. It received a lot of log initially, but also reaped criticism. To counter the problem with stablecoins, a daily transaction limit of €200 million has been set, which can cause congestion problems.