According to Cointelegraph: The Financial Stability Board (FSB), well known for its surveillance role in the global financial industry, has stressed the necessity for more extensive crypto regulations. This recommendation comes in the aftermath of turbulent market conditions triggered by the infamous FTX debacle.
On November 28, the FSB released an incisive report highlighting the potential need for additional regulations to inhibit the recurrence of a disaster akin to the FTX havoc. The calamitous collapse of the FTX cryptocurrency exchange underlined weaknesses in the multi-function crypto-asset intermediaries (MCIs), platforms that amalgamate trading and relevant operations.
The FSB reported, “MCI vulnerabilities are not very different from those of traditional finance, including leverage, liquidity mismatch, technology and operational vulnerabilities, and interconnections.” It noted specific combinations of functions within MCIs could “exacerbate these vulnerabilities,” when they engage in “proprietary trading, market making on their own trading venues and the lending and borrowing of crypto-assets.”
The FSB criticized the spotlighted deficiencies that are amplified by lack of "effective controls" and transparency. It also identified the central role of MCIs in the crypto-asset ecosystem and their concentration and market power as potential vulnerabilities.
The watchdog encourages regulators to evaluate if the recommendations proposed previously by the FSB and the International Organization of Securities Commissions are sufficient to prevent amplification of crypto-related risks in the broader financial landscape.
Requiring more progress to enhance cross-border cooperation and fill the information gaps identified, the FSB finalized its recommendations for a global crypto framework in July. Subsequently, in September, in conjunction with the International Monetary Fund (IMF), a set of policy recommendations for crypto assets, were issued. The regulatory roadmap was later adopted by G20, the group of 20 leading global economies. The FSB's latest remarks reflect its persistent vigil in leading global financial stability.
