There are \u201csignificant gaps\u201d in countries\u2019 attempts to regulate fast-growing crypto markets, which could potentially harm financial stability, the G20\u2019s risk watchdog warned on Thursday.<\/p>\n\n\n\n
The Financial Stability Board (FSB), a body founded in the aftermath of the global financial crisis, made a series of recommendations on rules for crypto in 2023, to try to bring it in line with the mainstream financial sector.<\/p>\n\n\n\n
In Thursday\u2019s review, it said while some progress had been made, international implementation and coordination of rules remained too \u201cfragmented, inconsistent, and insufficient to address the global nature of crypto-asset markets\u201d.<\/p>\n\n\n\n
Financial stability risks remain \u201climited at present\u201d it assessed, but they are now rising with the surge in bitcoin and other cryptocurrencies having doubled the value of the global crypto market to $4 trillion over the last year.<\/p>\n\n\n\n
\u201cThis is consequential,\u201d FSB secretary general John Schindler told Reuters, describing the concerns raised in the review. \u201cThese crypto assets can move across borders very easily, much more easily than other financial assets.\u201d<\/p>\n\n\n\n
STABLECOIN RULES LACKING<\/p>\n\n\n\n
This year\u2019s surge in the value of the crypto market has come against a backdrop of U.S. President Donald Trump\u2019s pro-crypto stance.<\/p>\n\n\n\n
Schindler said there was a need for close monitoring as crypto becomes increasingly connected with the traditional financial system and stablecoins \u2013 cryptocurrencies pegged to the dollar for the most part \u2013 become more widely used.<\/p>\n\n\n\n
One of the key concerns flagged by the FSB\u2019s report was that hardly any countries have complete regulatory frameworks for stablecoins yet.<\/p>\n\n\n\n
While still small in comparison to the bitcoin-dominated cryptocurrency markets, the market for stablecoins has grown by almost three-quarters over the last year to just under $290 billion, a trajectory expected to continue with U.S. rules on them now in place<\/p>\n\n\n\n
The FSB\u2019s report reviewed 29 jurisdictions\u2019 implementation of crypto and stablecoin recommendations, including the U.S., EU, Hong Kong and the UK, although the U.S. only participated in the stablecoin aspect. El Salvador, where the world\u2019s largest stablecoin, Tether, is based did not take part, however.<\/p>\n\n\n\n
Schindler said the latest review had still been worthwhile even without El Salvador\u2019s input given the FSB was already aware of the risks, but stressed the need for better global cooperation and coordination from all jurisdictions going forward.<\/p>\n\n\n\n
\u201cWe can all put in place frameworks, but if there are people who are not cooperating and helping each other, it\u2019s just going to be really challenging because these things just they don\u2019t observe borders,\u201d he said.<\/p>\n\n\n\n
RISKS \u2018LIMITED AT PRESENT\u2019 BUT GROWING<\/p>\n\n\n\n
Global rulemakers were jolted in action by the collapse of crypto exchange FTX and demise of TerraUSD\/Luna coins in 2022.<\/p>\n\n\n\n
There has been major jitters over the last week too, with the largest crypto crash in history on Friday triggering almost $20 billion of liquidations in the market.<\/p>\n\n\n\n
The FSB\u2019s report laid out a list of eight recommendations for jurisdictions to speed up the implementation of comprehensive and globally consistent rules and for better cross-border cooperation and coordination.<\/p>\n\n\n\n
They follow similar concerns raised by the European Union\u2019s securities watchdog in April that even small markets can be the source of bigger problems in the financial system.<\/p>\n\n\n\n
Even if countries have their own regulatory regimes, they can still be impacted by the activities of crypto companies who are headquartered offshore, Schindler said.<\/p>\n\n\n\n
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