Following the collapse of FTX, the Financial Stability Board (FSB), an international supervisory body, called for a global framework to regulate and supervise cryptocurrencies, saying it would assess vulnerabilities associated with decentralized finance (DeFi).
At a meeting held on December 6 in Basel, The FSB said it planned to “improve its crypto asset monitoring framework” to include “DeFi-specific vulnerability indicators,” as well as address the potential impact of DeFi becoming more closely connected to traditional financial markets. According to the supervisory body, the risks to the financial stability of the cryptocurrency market were “limited” after the liquidity crisis and subsequent bankruptcy of FTX, but “the growing links of crypto-asset companies with the main markets and financial institutions” were increasing. its potential.
“Cryptocurrency trading platforms, by combining multiple activities that are normally separated in traditional finance, can lead to concentrations of risk, conflicts of interest, and misuse of client assets,” the FSB noted. “The FSB stressed the importance of continued vigilance and the urgency of advancing the policy work program by the FSB and standardization bodies to establish a global regulatory and supervisory framework, including in non-FSB member jurisdictions.”
The FSB Plenary met today in Basel. Topics covered included the outlook for financial stability; #cryptoasets and decentralized finance (#DeFi); addressing financial risks from #ClimateChange; and issues affecting #emergingmarkets and developing economies https://t.co/Oketd2CSZL pic.twitter.com/ZTnm8oTaia
— The FSB (@FinStbBoard) December 6, 2022
The FSB has previously proposed a global framework for cryptocurrencies aimed at addressing potential risks while “harnessing the potential benefits of such technology.” Members of the public also have until December 15 to submit comments based on the group’s recommendations regarding stablecoins.
Created during a G20 summit in 2009, the FSB has members representing institutions from more than 20 jurisdictions, including those with financial regulators, central banks and finance ministries. Although the Council can make recommendations to global policy makers, it largely acts as an advisory body with no enforcement authority.
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