‘FSB calls for stricter global crypto regulations after turbulent year’

'FSB calls for stricter global crypto regulations after turbulent year'

The Growing Need for Stronger Regulation in the Blockchain Industry

The blockchain industry has experienced significant growth and innovation in recent years, but it has also been plagued by allegations of bad behavior and misconduct. To address these concerns, international standard-setters are calling for tougher rules on safeguarding crypto clients’ assets and avoiding conflicts of interest.

The Financial Stability Board (FSB), a regulatory body representing jurisdictions such as the U.S., EU, China, and the U.K., has published recommendations aimed at ensuring consistent and comprehensive regulation of the blockchain sector. These recommendations are a response to the recent turbulent year in the crypto market, which has highlighted the intrinsic volatility and structural vulnerabilities of crypto-assets and related players.

One of the key motivations behind these recommendations is the need to prevent the kind of behavior that companies like FTX and Celsius have been accused of. FTX, which filed for bankruptcy in November, has faced allegations of poor record-keeping and misuse of customer funds. Celsius co-founder and ex-CEO Alex Mashinsky was also recently arrested on charges of misleading investors and manipulating token prices for personal gain.

The FSB’s recommendations include provisions that could force major crypto conglomerates to separate certain activities and functions. This is an important step towards ensuring greater transparency and accountability within the industry. By implementing these recommendations, regulators aim to prevent future collapses of crypto-focused banks and stabilize stablecoins, which have experienced brief de-pegging and sudden downfall in recent months.

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It is worth noting that different global players are taking varied approaches to regulating the blockchain industry. The European Union has crafted a new tailored law called the Markets in Crypto Assets (MiCA) regulation, while the U.S. Securities and Exchange Commission (SEC) is seeking to apply existing rules designed for traditional financial instruments. The FSB’s principles, however, aim to provide a flexible framework that can accommodate both approaches, while emphasizing the need for continuity.

According to FSB Secretary General John Schindler, the global framework does not create a completely new regulatory rulebook for crypto assets. He argues that crypto asset activities are not fundamentally different from traditional financial activities, and therefore, similar rules should apply. While jurisdictions work towards implementing these standards, Schindler encourages all crypto-asset players to start complying with the basic expectations and standards outlined in the recommendations.

The final recommendations from the FSB come after a consultation process in which traditional finance companies advocated for stronger controls in the blockchain industry. On the other hand, companies like Binance and Coinbase have expressed concerns that stricter regulations may stifle innovation. Finding the right balance between effective regulation and fostering innovation remains an ongoing challenge for regulators and industry participants.

In conclusion, the blockchain industry is in need of stronger regulation to address the misconduct and vulnerabilities that have emerged in recent times. The recommendations published by the FSB aim to provide a comprehensive framework that promotes transparency, safeguards client assets, and addresses conflicts of interest. While different jurisdictions may take varied approaches to regulation, the fundamental goal is to ensure that the same basic standards are upheld across the industry. As the industry evolves, it is crucial for all stakeholders to collaborate and adhere to these standards to build a more secure and trustworthy blockchain ecosystem.