Regulators propose first global rules before 'crypto winter' thaw
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[October 11, 2022]
By Huw Jones
LONDON (Reuters) - Cryptoasset companies
should set aside capital like banks when undertaking similar activities,
regulators proposed on Tuesday in their first global rules as a "crypto
winter" wiped $2 trillion off the sector, leaving investors nursing
losses.
The Financial Stability Board (FSB), which coordinates financial
rulemaking among Group of 20 Economies (G20), made nine recommendations
for members to apply.
Currently, the sector is largely unregulated in most countries, having
to only comply with rules for safeguarding against money laundering and
terrorist financing as regulators warn investors they risk losing every
penny.
Klaas Knot, the Dutch central bank president who chairs the FSB, said
the "crypto winter" or recent sharp pullback in cryptocurrencies, has
reinforced the board's assessment of existing structural
vulnerabilities.
The FSB has said crypto, which has a combined value of about $935
billion versus $3 trillion at their peak in November last year, are not
big enough to threaten financial stability, but rules were needed to
regulate a likely recovery.
"Concerns about the risks they pose to financial stability are therefore
likely to come back to the fore sooner rather than later," Knot said in
a letter to G20 finance ministers meeting in Washington this week.
![](http://archives.lincolndailynews.com/2022/Oct/11/images/ads/current/chicagost_sda_FHG_2022.png)
FSB recommends putting in place a framework for oversight, and managing
risks and data at crypto firms, and having plans in place for a smooth
shutting down of cryptoasset firms in trouble.
"Several crypto-asset lenders failed during the recent market turmoil as
a result of vulnerability to runs, thin capitalisation, concentrated
exposures to risky entities, and risky trading and business ventures,"
the FSB said.
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![](../images/101122PIX/busine45.jpg)
Representations of cryptocurrencies
Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are placed on PC
motherboard in this illustration taken, June 29, 2021. REUTERS/Dado
Ruvic
![](http://archives.lincolndailynews.com/2022/Oct/11/images/ads/current/state_bank_lda_PPP_2022.png)
The proposals seek cross-border consistency to regulating
crypto-assets, particularly as the European Union finalises
groundbreaking rules to regulate the sector from 2024.
The underlying principle is that the same activity should be
regulated in the same way, whether undertaken by a cryptoasset
company, bank or payments provider, and that crypto firms may need
to separate some functions to ensure this, the FSB said.
The proposals have been put out to public consultation until Dec.
15, before being finalised by mid-2023, when FSB members would be
expected to fast-track their implementation.
The FSB also reviewed its guidance on regulating stablecoins, a type
of cryptocurrency usually backed by a currency like the dollar or
assets.
The crash of the dollar-backed Terra stablecoin in May highlighted
the high risk of loss and potential fragility of stablecoins that
lack a stabilisation mechanism, the FSB said.
The watchdog said that most existing stablecoins don't meet its
guidance and it proposed revisions to the guidance include
strengthening governance and stabilisation mechanisms of stablecoins,
and clarifying and strengthening redemption rights.
(Reporting by Huw Jones; editing by David Evans)
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