BRUSSELS — Global finance regulators’ failure to impose sufficient rules on cryptocurrency could threaten the world’s financial stability, global risk body the Financial Stability Board has warned.
Reviewing the rollout of a global framework for crypto rules, the FSB said there are “significant gaps and inconsistencies” in implementing the rules, which could “pose risks to financial stability and to the development of a resilient digital asset ecosystem.”
On the regulation of stablecoins, which are virtual currencies pegged to real-world assets, the FSB said regulation is “lagging.”
Because of the international, decentralized nature of financial technologies like crypto, having gaps in global rules is an issue as providers can go wherever the rules are the most lax, which “complicates oversight,” the review said. It added that global cooperation on regulating the currencies is “fragmented, inconsistent, and insufficient” to address their global nature.
The FSB also flagged gaps in oversight of crypto service providers, saying supervision of “potentially higher risk activities, such as borrowing, lending, and margin trading, is often lacking” and enforcement can “lag behind regulatory development.”
The review recommended that governments implement the global crypto framework fully. It also said they should “conduct an assessment of the scale and nature of cross-border crypto-asset activities into and out of their jurisdictions” at the “appropriate time.”
Earlier this week, FSB chair Andrew Bailey warned G20 finance ministers and central bank governors that stablecoins are a potential area of vulnerability for the financial system.
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