FinTechBlockchainStep up risk assessments of cryptocurrencies, warns FSB

Step up risk assessments of cryptocurrencies, warns FSB

The FSB urges regulators to improve its risk assessments for cryptocurrencies and develop a robust framework as the regulations differ

Inadequate crypto assessment and patchy regulations mean that regulators need to step up to the mark in the digital currency space, according to the FSB.

The warning comes as the Switzerland-based FSB published a report on crypto-assets, which considers work underway, regulatory approaches and potential gaps at the G20 finance ministers and central bank governors. The report concludes with the recommendation that the G20 keep the topic of regulatory approaches and potential gaps, including the question of whether more coordination is needed, under review.

FSB said that the lack of global standards could be a reason why cryptocurrencies don’t fall within the scope of payment regulators.

Digital asset regulation has become a big topic in 2019 after the rapid rise and fall in cryptocurrency prices at the end of 2017 and 2018 respectively.

Regulations differ for cryptocurrencies

The FSB published its framework for monitoring of financial stability implications of crypto-assets in October 2018 and last reported to the G20 on the work of the international organisations in July 2018.

The report covers the work of the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissions (IOSCO), the Financial Action Task Force (FATF), the Organisation for Economic Co-operation and Development (OECD), and the FSB.

Cryptocurrency regulations differ from country to country, and even state-to-state. For instance, China adopted a hawkish stance on crypto and drove out both miners and crypto exchanges. While Japan had a more favorable view of the sector. The US and Britain are still undecided about their response.

The agency concluded that this challenge makes the goal of a robust framework all the more important.

Need for standardized rules

While cryptocurrencies, a term that includes bitcoin and No.2 digital coin ethereum, have only existed for a decade, they have created a headache for regulators across the globe. The highly volatile market has created further trouble for governments and central banks, and crypto-awareness for the corporate keeps increasing.

Quick technological change meant the risks associated with crypto-asset markets and the level of significance of potential regulatory gaps will keep evolving.

A forward-looking approach to monitoring crypto-assets can help provide a basis for identifying potential gaps and areas that should be prioritised or focused on.

With the rise has come renewed interest from risk-tolerant investors. Major financial firms including Fidelity International have also moved to offer cryptocurrency-related services.

The House of Commons Treasury Committee launched its Digital Currencies inquiry on 22 February 2018 for the UK to examine the role of digital currencies in the UK, consider the potential impact of distributed ledger technology, also known as blockchain on financial institutions and financial infrastructure; and evaluate the regulatory response to digital currencies from the Government, the Financial Conduct Authority (FCA) and the Bank of England, and how regulation could be balanced to provide adequate protection for consumers and businesses without stifling innovation.

Maya Kumar, Head of UK and Ireland Luno has said on regulation of cryptocurrencies: “I would say there’s a misconception that it’s anti-authoritarian. The internet is de-centralized rather than anti-authoritarian; it’s a means of transmitting information. It’s not a negative, it’s just creating efficiencies. Cryptocurrency is similar.”

Related Articles

Commerzbank and LBBW execute landmark trade finance transaction via third party

Blockchain Commerzbank and LBBW execute landmark trade finance transaction via third party

2d Tom Lemmon
IBM launches blockchain supplier management platform

Automation IBM launches blockchain supplier management platform

5d Jay Ashar
Commerzbank tests first blockchain-based machine-to-machine payment solution

Blockchain Commerzbank tests first blockchain-based machine-to-machine payment solution

5d Austin Clark
Value of blockchain in trade finance yet to be realised

Blockchain Value of blockchain in trade finance yet to be realised

1w Jay Ashar
Case study: Disrupting trade finance with technology for the good of the business

10 Minutes With The Treasury Case study: Disrupting trade finance with technology for the good of the business

4w Jay Ashar
Blockchain to deliver faster, cheaper and less complex cross-border payments

Blockchain Blockchain to deliver faster, cheaper and less complex cross-border payments

1m Jay Ashar
G20 leaders must embrace cryptocurrency regulation

Blockchain G20 leaders must embrace cryptocurrency regulation

2m Jay Ashar
Landmark and HSBC carry out dual-platform blockchain transaction

Asia Pacific Landmark and HSBC carry out dual-platform blockchain transaction

2m Jay Ashar

Whitepapers & Resources

Are You Ready to Implement your GRC Solution?

Are You Ready to Implement your GRC Solution?

4m
TIS Sanction Screening Survey Report

Payments TIS Sanction Screening Survey Report

1m
The Challenges of Regulatory Reporting

Brexit The Challenges of Regulatory Reporting

7m
Mitigating Costs and Exposure - A Multilateral Netting White Paper

Mitigating Costs and Exposure - A Multilateral Netting White Paper

6m