LONDON: Globally agreed rules leave crypto firms with no option but to introduce basic safeguards to prevent the blow-ups seen at FTX exchange and other crypto casualties, the G20’s Financial Stability Board said on Monday.
The FSB published on Monday final recommendations requested by the G20 on supervising firms that trade cryptoassets such as bitcoin. The watchdog also revised its existing recommendations for stablecoins in light of the demise of TerraUSD/Luna coins.
Both borrow universal guard rails from mainstream finance before the sector grows big enough to pose a threat to financial stability by focusing on robust governance to avoid conflicts of interest, and proper risk management and disclosures to ensure that customer money is segregated from company cash.
“As recent events have illustrated, if linkages to traditional finance were to grow further, spillovers from cryptoasset markets into the broader financial system could increase,” the FSB said.
The collapse of FTX in November 2022 highlighted vulnerabilities from crypto firms and the FSB said that all countries should apply the recommendations, even those that are not members of the watchdog. FTX was based in the Bahamas, not an FSB member.
“Therefore, cryptoasset players need to stop operating outside the regulatory perimeter or in non-compliance with existing rules,” FSB Secretary General John Schindler told reporters.
