FSB Set to Issue Global Standards to Address Crypto Risks
The Financial Stability Board (FSB) announced advanced plans to lay out standards to address crypto risks in 2023. The FSB secretary general, Dietrich Domanski, considered the disastrous collapse of FTX, Terra, and Three Arrows Capital and revealed the crypto space has inherent risks that need urgent solutions.
FTX Collapse Triggers Urgency for Harmonized Standards
The outgoing executive of the global financial watchdog noted that FTX’s downfall triggered debates on the urgency of regulating the crypto sector. Domanski noted that FSB had scheduled the layout project for early 2023. He cited the contagion nature of the FTX exchange collapse as a reason to expedite crypto regulation next year.
Domanski dismissed arguments by crypto market participants that the increased appetite for regulation. Instead, he commended the authorities for according to the crypto industry fair accommodation and establishing infrastructure for its innovation.
Domanski conveyed the FSB’s goal in laying out the harmonized standards for crypto to subject the digital asset projects to similar standards as conventional banks when giving similar services. He downplayed the claim that regulating crypto space will subject operators to hostile compliance requirements they perceived as hostile to innovation and adoption.
Crypto Operators not Exempted from Safer Financial Governance Practices
Domanski questioned why crypto operators provided decentralized finance protocols that host lending and borrowing that rival traditional banking products yet opposed to complying with similar standards. In support of criticism directed towards global policymakers’ failure in their oversight role to detect alleged FTX fraud, the FXB official indicated standards could have averted the resulting crisis.
Domanski illustrated the collapse of Terraform Labs, 3AC, and FTX, confirming the widespread lapse in regulations and operating standards. He lamented that the absence of rules and harmonized standards eliminated the preventive mechanism that could have instilled sound governance, thereby averting Terra and FTX’s collapse.
Increased Appetite for Harmonized Regulatory Regime
The FSB official echoed US Deputy Treasury Secretary Wally Adeyemo’s speech at the Reuters NEXT conference held in Washington D.C. on December 1, indicating that FTX implosion necessitates formulating international crypto regulations. Adeyemo portrayed the need to protect users, the global financial system, and investors from illegal crypto use. The US Treasury official noted that while crypto involves a global phenomenon, the US will partner with international agencies in designing a harmonized regulatory regime.
The FSB official confirmed FSB would issue a timeline directing global regulators to embrace initial recommendations. Subsequently, national and regional regulators can incorporate the agreed-upon standards into law to safeguard the economy as they encourage crypto adoption.
Editorial credit: Jarretera / Shutterstock.com
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