Global rules compel crypto firms to launch safeguards

The failure of FTX in November last year underscored weaknesses around crypto companies

Globally agreed rules leave crypto companies with no choice but to launch fundamental protective measures to prevent the problems seen at FTX exchange and other crypto failures, the G20’s Financial Stability Board (FSB) said on Monday.

The FSB published on Monday final proposals requested by the G20 group of nations on overseeing companies that trade cryptoassets like bitcoin. FSB also updated its current proposals for stablecoins in the wake of the demise of TerraUSD/Luna coins.

As recent events have shown, if connections to traditional finance were to rise further, spillovers from cryptoasset markets into the wider financial system could rise, the watchdog added.

The failure of FTX in November last year underscored weaknesses around crypto companies and the FSB added that all countries should implement the recommendations, even those that are not members of the watchdog. FTX was based in the Bahamas, which is not a member of the FSB.

So, cryptoasset players need to stop operating outside the regulatory perimeter or in non-compliance with current rules, Financial Stability Board Secretary General John Schindler told reporters.

These players can no longer contend there is a lack of regulatory clarity, as our framework makes clear the standards that should apply, he added.

Bitcoin has reached 13-month highs as the crypto industry recovers from last year’s retreat, strengthened by a landmark legal win for Ripple Labs Inc on Thursday, which had challenged regulators over how far tokens should come under U.S. securities law.

The FSB norms are expected to be made finer by additional measures from global banking and securities watchdogs Basel Committee and IOSCO.

IOSCO proposed in May the first global approach to regulating crypto market day-to-day operations.