In February 2022, the FSB published a risk assessment on crypto-assets, which outlined its concerns over the rapid growth in crypto-assets. The recent turmoil in crypto-asset markets highlights their intrinsic volatility, structural vulnerabilities and increasing interconnectedness with the traditional financial system. In addition to imposing potentially large losses on investors and threatening market confidence arising from crystallisation of conduct risks, the failure of a market player can also quickly transmit risks to other parts of the crypto-asset ecosystem. It may have spill-over effects on important parts of traditional finance such as short-term funding markets. An effective regulatory framework must ensure that crypto-asset activities posing risks similar to traditional financial activities are subject to the same regulatory outcomes, while taking account of novel features of crypto-assets and harnessing their benefits.
The statement notes that crypto-assets and markets must be subject to effective regulation and oversight commensurate to the risks they pose, both at the domestic and international level. It calls for adherence by so-called stablecoins and crypto-assets to relevant existing requirements where regulations apply to address the risks these assets pose. It also calls for crypto-asset service providers to ensure compliance with existing legal obligations in the jurisdictions in which they operate at all times.
This statement outlines the work the FSB is taking forward, in collaboration with standard-setting bodies, including the Financial Action Task Force, on the regulation and supervision of ‘unbacked’ crypto-assets and ‘stablecoins’, as well as on analysing the financial stability implications of Decentralised Finance. This work should provide a solid basis for a consistent and comprehensive regulation of crypto assets.