FSB warns G20 of major gaps in crypto regulation, urging coordinated action, particularly on stablecoin, to protect investors and limit risks to global financial stability.
The Financial Stability Board (FSB), which advises the G20 on global financial risks, has warned that major gaps remain in the regulation of cryptocurrencies and stablecoins, raising concerns over financial stability if markets continue to expand without consistent oversight.
In a report released ahead of this week’s G20 finance ministers meetings, the Financial Stability Board (FSB) said that while many countries have introduced new rules for digital assets, progress has been uneven. The FSB urged governments to close what it described as “significant regulatory gaps” and to coordinate more closely to prevent future shocks.
Inconsistent Rules Between National Crypto Companies
The FSB, which advises the G20 on financial risk, said that there are identifiable differences between national approaches and that they were creating space for “regulatory arbitrage”, where crypto companies base operations in countries which have the least stringent rules.
Officials warned that this patchwork system could lead to risks spreading quickly between markets, particularly as global financial institutions increase their ownership and involvement in digital assets.
Sablecoins, which are digital tokens designed to maintain a fixed value, remain a key concern. Despite efforts to strengthen safeguards, some remain loosely backed or operate with limited transparency, possibly leaving investors and regulators exposed.
A Call for Cooperation and Alignment
The FSB said that although steps have been taken in the United States, Europe and parts of Asia, no single framework has yet brought the entire market under consistent supervision. It urged G20 members to share data, align their rules and ensure that large crypto exchanges face proper capital, governance and risk-management requirements, similar to those applied to traditional financial institutions.
The FSB’s latest comments highlight that despite a wave of regulatory action and the implementation of new laws, the crypto sector still lacks the type of international coordination that exists for banks, insurers and other financial entities.
Some crypto companies welcome the call for clearer global standards, saying that consistent regulation would provide greater certainty for businesses and investors alike. Others argue that overly strict rules could stifle innovation and drive activity further into unregulated corners of the market.
Crypto investors may see it all differently as too much regulation may completely undermine the whole decentralised approach to finance and circle the world back to the control and red tape enforced by traditional banking.
Read more about hot-topics and the latest developments across the finance industry, in our Market News section or Crypto News section.
