The global financial standard agency calls on regulators to implement stringent regulations for the digital asset industry following the severe 2022 market crash. The financial stability board is proposing stricter rules for cryptocurrency to avoid conflict of interest, protect investors and curb the rising number of bad actors within the crypto space.
A Call For Tougher Rules
In a groundbreaking move, the Financial Stability Board (FSB) has released recommendations to establish a comprehensive regulatory framework for the cryptocurrency sector. The FSB draws members from regulators of various jurisdictions like the European Union, China, the United States, and the United Kingdom and aims to ensure a consistent approach to overseeing the fast-growing industry.
The recommendations build upon initial proposals introduced in October, designed to address and prevent the alleged misconduct of crypto firms such as FTX and Celsius. By acknowledging the inherent volatility and structural vulnerabilities of crypto-assets and their associated entities, the FSB seeks to implement new standards that would mandate major digital asset service providers to separate specific activities and functions.
Recall that FTX filed for Chapter 11 bankruptcy last November following a wave of damning accusations surrounding inadequate record-keeping practices and the improper utilization of customer funds. Meanwhile, Alex Mashinsky, the former CEO of Celsius, was arrested in New York last Thursday.
Despite pleading not guilty to multiple charges, Mashinsky was accused of deceiving investors and manipulating token prices for personal gain. These recent controversies have played a prominent role in driving the urgent need for more stringent global regulations, as highlighted by the FSB.
Also read:Meanwhile, the board’s rationale for stricter rules extends beyond these high-profile incidents. It includes the collapse of crypto-friendly banks, the temporary de-pegging of Circle’s USDC stablecoin two months ago, and the sudden collapse of the TerraUSD stablecoin in May 2022.
This last event began a new era of uncertainty in the crypto market.
World Authorities’ Approach To Crypto Regulations
Since the start of the year, there have been different strategies among major international stakeholders regarding crypto regulations. The European Union has taken a proactive step by creating a unique legislative piece known as the Markets in Crypto Assets (MiCA) regulation.
This law is designed to address the unique characteristics and challenges presented by the crypto industry to the bloc’s economic stability. In contrast, the U.S. Securities and Exchange Commission (SEC) is pursuing an alternative path by enforcing century-old regulations previously formulated for the traditional financial sector.
Additionally, the SEC aims to adapt existing rules to include the evolving crypto landscape, leveraging historical frameworks to regulate this innovative industry. However, this difference in regulatory approaches highlights the complexities and ongoing debates surrounding the appropriate oversight and governance of crypto-assets.
It also highlights the varying perspectives on balancing the promotion of innovation with investor protection within the rapidly evolving crypto ecosystem. While the principles outlined by the FSB theoretically possess the potential to accommodate both regulatory approaches, officials stressed the significance of maintaining consistency among all regulators.
The aim is to strike a balance between embracing flexibility in adapting to the unique characteristics of the crypto sector and ensuring a consistent and cohesive global regulatory framework.
Many industry players agree with the FSB that there is a need for clear crypto regulations.
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