04 Jun 2019
Global financial regulators should consider how the risks of cryptocurrencies and other blockchain-related assets could evolve when assessing their exposure to the technology, a financial stability watchdog said Friday.
Governments should publicly state, as much as they can, what their current vulnerabilities to crypto-assets are, including both bank and non-bank institutions, the Financial Stability Board (FSB) said in a report submitted to G20 finance ministers and central bank governors. National regulators must also seek to strike a balance between a multilateral response and the fact that different countries face different risks to blockchain transactions, the FSB said.
The report comes as international standard-setting bodies, including the Paris-based Financial Action Task Force (FATF) and the Organisation for Economic Co-operation and Development (OECD), are formalizing recommendations to address the financial stability and criminal risks posed by the growing crypto-sector.
At a national level, however, “authorities have chosen different approaches and taken various types of actions to address relevant issues,” the FSB said. “In some cases, differences in regulation between jurisdictions reflect different national market developments and differences in underlying legal and regulatory frameworks for the respective financial systems.”
Consequently, “gaps may arise” in the oversight of crypto-assets, particularly when the products or services fall outside the remit of market supervision, the report said.
FATF, which amended its recommendations in 2018 to explicitly call for “virtual assets” to be regulated for anti-money laundering purposes, is slated to issue new guidance on virtual currencies and formally adopt a interpretive note clarifying its expectations in June.
The Group of 20 is also expected to urge FATF to draft new measures to prevent criminal exploitation of cryptocurrencies and similar crypto-products later this week, the Japan Times reported Saturday. G20 leaders will separately reach a formal agreement to strengthen regulations on cryptocurrency exchanges, including potentially calling for required registrations of the companies, the news outlet said.
Despite the apparent risks of blockchain-facilitated payments, cryptocurrencies appear headed toward wider adoption in the coming years.
Facebook, which is developing a cryptocurrency that can be used beyond its social media platform, has begun talks with the US Commodity Futures Trading Commission to determine whether its planned “GlobalCoin” falls under the purview of the regulator, the Financial Times said Sunday, citing the head of the agency.
The FSB, which last reported to the G20 on crypto-assets in July 2018, recommended in its report that global regulators keep the topic of supervisory approaches and further coordination under review.
Count reading this article to your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet