FSB calls for disclosures, regulatory framework for crypto assets

In its report on regulating crypto assets, the Financial Stability Board (FSB) has called for a raft of measures, including data collection and reporting, cross-border co-operation, a governance framework, and regulatory power for authorities.

The FSB has drawn up a set of nine recommendations in its report on regulation, supervision, and oversight of crypto-asset activities and markets.

This report will be part of the synthesis paper being drafted along with the report of the International Monetary Fund on this subject as part of the ongoing Group of Twenty (G20) talks. The report, along with a note from the Presidency, will be shared before the G20 leaders’ summit in September.

Authorities should have and utilise the appropriate powers and tools with adequate resources to regulate, supervise, and oversee crypto-asset activities and markets, and enforce relevant laws and regulations effectively, the FSB said on Monday.

The FSB’s report has recommended that crypto-asset issuers and service providers too be regulated on a functional basis and proportionate to the financial stability risk they pose, or potentially pose. This has to be in line with the principle of “same activity, same risk, same regulation”.

Such entities — crypto-asset issuers and service providers — should also be required to disclose a comprehensive governance framework with clear and direct lines of responsibility and accountability for all functions and activities they are conducting. They should also have an effective risk management framework in place that comprehensively addresses all material risks associated with their activities.

“The governance framework should be proportionate to their risk, size, complexity, and systemic importance, as well as to the financial stability risk that may be posed by the activity or market in which the crypto-asset issuers and service providers are participating,” the report observed.

Authorities should, to the extent necessary, achieve regulatory outcomes comparable to those in traditional finance, the FSB has said.

The report has also called for domestic and international co-operation for efficient and effective communication and information-sharing to encourage consistency in regulatory and supervisory outcomes.

Robust frameworks for collecting, storing, safeguarding, and timely and accurate reporting of data should be put in place by crypto-asset issuers, and the authorities should have access to the data as necessary.

Crypto-asset issuers and service providers disclose to users and relevant stakeholders comprehensive, clear, and transparent information regarding their governance framework, operations, risk profiles, and financial conditions, as well as the products they provide and activities they conduct.

There is also a need, the FSB stressed, to identify and monitor the relevant interconnections within the crypto-asset ecosystem as well as with the wider financial system.

“Authorities should address the financial stability risks that arise from these interconnections and interdependencies,” it stated.