FSB and IOSCO publish reports on implementation of global crypto-asset regulatory frameworks

The Financial Stability Board (FSB) has published a thematic peer review report assessing the implementation progress of its 2023 global regulatory framework for crypto-asset activities. As of August of this year, the review shows that while many jurisdictions have made notable progress in regulating crypto-asset activities, there has been slower progress in finalising their global stablecoin arrangements (GSCs). Even where regulatory frameworks have been finalised, alignment with FSB recommendations remains limited, especially regarding stablecoin arrangements and crypto-asset service providers (CASPs). These gaps could pose risks to financial stability and to the development of a resilient digital asset ecosystem.

In response to the concerns, the report sets out eight recommendations to address outstanding issues in the following key areas set out below.

• Implementation progress – jurisdictions should review their current plans to ensure that, when implemented, they will amount to full implementation of the FSB Crypto Framework. They should also prioritise implementation given the rapid pace of developments in the crypto-asset markets.
• Comprehensiveness of regulatory frameworks – with regards to their crypto-asset frameworks, jurisdictions should focus on CASP activities that give rise to financial stability risks and implement the supervisory reporting requirements that are relevant in their jurisdiction. With regards to regulatory frameworks for GSCs, jurisdictions should focus on requirements for liquidity risk management, capital buffers, stress testing, user redemption, custody of and eligibility for the reserve of assets and recovery and resolution planning (including insolvency frameworks). Jurisdictions should also improve their data capabilities and infrastructure to be able to monitor financial stability risks within the crypto-asset market and between the crypto-asset market and traditional financial markets.
• Consistency – the FSB should work closely with standard-setting bodies and international organisations on future work to promote further regulatory alignment for stablecoin arrangements, including through information sharing.
• Cross border corporation and coordination – when appropriate, jurisdictions should assess the scale and nature of cross-border crypto-asset activity into and out of their jurisdiction and engage in cross-border cooperation. This includes leveraging existing tools and frameworks and developing new bilateral or multilateral arrangements.

The International Organization of Securities Commissions (IOSCO) also conducted a thematic review on the implementation of its crypto and digital asset framework, and has published its final report on the same day. The IOSCO report focuses on market integrity and investor protection, assessing the implementation of a subset of ten recommendations from the IOSCO Recommendations. These recommendations cover areas such as governance, conflicts of interest, fraud and market abuse, cross-border cooperation, custody, retail client protections and disclosures. The FSB and IOSCO have issued a joint information note summarising the scope and conclusions of both reports.

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