Key Points
- The G20’s financial watchdog has warned of “significant gaps” in global crypto regulation.
- It says the current rules are too “fragmented, inconsistent, and insufficient.”
- The FSB is particularly concerned about the lack of rules for stablecoins. The risks to financial stability are currently “limited” but are growing rapidly.
- The watchdog is calling for better international cooperation to create a consistent set of global rules.
The G20’s top financial risk watchdog has issued a stark warning. There are “significant gaps” in the global effort to regulate cryptocurrencies, which could pose a threat to financial stability. The Financial Stability Board (FSB) said on Thursday that while some progress has been made, the current rules are too “fragmented, inconsistent, and insufficient” to handle the global nature of the crypto market.
The FSB, which was created after the 2008 financial crisis to prevent another meltdown, made a series of recommendations for crypto rules in 2023. But in its new review, it found that most countries are still lagging.
While the FSB says the risks to the broader financial system are “limited at present,” it warns that they are growing fast. The global crypto market has doubled in value to over $4 trillion in the last year, fueled by a surge in Bitcoin and other digital assets.
A key concern is the lack of rules for stablecoins, which are pegged to the dollar and are becoming more widely used. “Hardly any countries have complete regulatory frameworks for stablecoins yet,” the report said.
The FSB also stressed the need for better international cooperation. Because crypto assets can move across borders so easily, a lack of coordination makes it “really challenging” to enforce any rules. This was highlighted by the fact that El Salvador, where the world’s largest stablecoin, Tether, is based, did not even participate in the FSB’s review.
