Financial Stability Board Calls for Additional Regulatory Measures on Crypto Firms

By: Isha Das

The Financial Stability Board (FSB) has released a report suggesting that the crypto industry might need additional regulatory measures to avoid another major incident like the recent FTX crisis. The report drew attention to the vulnerabilities in multi-function crypto-asset intermediaries (MCIs), platforms that combine multiple functionalities like trading and related operations.

While these vulnerabilities are similar to traditional finance, including leverage, liquidity mismatch, and technological and operational risks, the FSB mentioned that in the case of MCIs, specific function combinations might inflate these vulnerabilities. It also stated that the lack of effective controls and transparency amplifies these vulnerabilities.

The FSB emphasized on the significance of MCIs in the crypto-asset ecosystem and their market power and concentration, proposing that regulators assess whether recommendations by the FSB and the International Organization of Securities Commissions could restrain the enhancement of crypto-related risks in the financial landscape. The board also suggested the need to enhance cross-border cooperation, information sharing, and addressing information gaps identified in the report.