Regulator calls for more stringent crypto regulations

The Financial Stability Board is calling on cryptocurrencies to face more stringent regulations and supervision in the wake of several failures and ongoing stability concerns. .The international standard-setting body recommended that regulatory frameworks be applied to both global stablecoin and crypto-asset activities."The framework is based on the principle of 'same activity, same risk, same regulation,' and provides a strong basis for ensuring that crypto-asset activities and so-called stablecoins are subject to consistent and comprehensive regulation, commensurate to the risks they pose, while supporting responsible innovations potentially brought by the technological change," FSB stated. .Crypto issuers should "maintain adequate safeguarding of customer assets and protect ownership rights, including in insolvency", according to the FSB, and be subjected to regulation regarding conflicts of interest caused by some crypto issuers combining multiple functions and having multiple entities financing each other within their organization. The recommendations also include strengthening information-sharing as some crypto issuers and service providers seek to avoid regulation and oversight by moving to places with less stringent oversight .The report came after a tumultuous 2022 for crypto. In May 2022, the market suffered sharp decreases in value, showing that the high volatility of the industry can lead to strains and failures of crypto-asset intermediaries. In November, consumers lost hundreds of millions of dollars following the collapse of crypto asset platforms FTX and Voyager. Also last year, blockchain payment platform Terra, crypto platform Voyager Digital and crypto hedge fund Three Arrows Capital also imploded. .FTX CEO and Founder Sam Bankman-Fried now faces federal charges for wire, securities and commodities fraud, money laundering and campaign finance law violations. According to the U.S. Securities and Exchange Commission, Bankman-Fried transferred customer funds from FTX to trading arm Alameda Research to help it meet its liabilities and make undisclosed venture investments, extravagant real estate purchases and large political donations without disclosing the moves to company insiders or the public. . "Although spillovers to the traditional financial system have been limited, stress events in crypto-asset markets caused significant losses to investors and shook confidence in these markets," the Financial Stability Board stated. "Given the speed of developments in this area, interlinkages and possible spillovers between the crypto-asset and traditional financial systems could markedly increase.".Other regulatory bodies have also sounded the alarm on risks posed by crypto. In early January, the Federal Reserve Board of Governors, FDIC and the Office of the Comptroller of the Currency warned banks that exposure to the crypto industry leaves them at greater risk of customers falling victim to scams and fraud. Though they did not explicitly tell banks to avoid the industry, the regulators said that exposure to crypto "is highly likely to be inconsistent with safe and sound banking practices."