FSB Finalizes Global Regulatory Framework for Crypto-Asset Activities

The Financial Stability Board ("FSB") issued an "umbrella public note" on its global regulatory framework for crypto-asset activities. The final recommendations are intended to promote "the comprehensiveness and international consistency of regulatory and supervisory approaches."

According to the latest document, the FSB's global regulatory framework is based on the principle of "same activity, same risk, same regulation" to ensure that the final recommendations:

• promote regulatory frameworks for crypto-assets that (i) correlate to the risks they pose to financial stability and (ii) subject crypto activities to the same regulations as similar activities under a traditional financial system;
• allow flexibility for jurisdictional authorities when applying the recommendations to their current regulations or new rulemakings; and
• are technology neutral.

For widely used stablecoins across multiple jurisdictions, the FSB included a set of separate recommendations to address the need for heightened regulatory and supervisory requirements and to account for their particular risks.

In addition, the FSB revised its recommendations to reflect crypto-related events from the past year that showcased crypto-assets’ "intrinsic volatility and structural vulnerabilities." The FSB included in its recommendations measures to:

• safeguard client assets by requiring financial service providers who hold their clients’ assets to keep them segregated from their own assets;
• prevent conflicts of interest; and
• encourage cross-border information sharing between authorities

The FSB stated that the recommendations will be used as input in a joint paper with the International Monetary Fund on a policy approach to crypto-assets and will be presented to the G20 in September 2023.