The era of regulatory ambiguity for cryptocurrency companies may be coming to an end. In a landmark move, the Financial Stability Board (FSB), a G20-affiliated body responsible for monitoring and advising on global financial systems, announced on July 17, 2023, that crypto firms can no longer operate in the shadows. With the release of a comprehensive new regulatory framework, the FSB is sending a clear message: no jurisdictional loopholes, no unregulated operations — crypto is now under global scrutiny.
This development follows a turbulent period in the digital asset space, most notably the collapse of FTX in November 2022. Once a major player in the crypto exchange landscape, FTX’s downfall exposed critical vulnerabilities — lack of transparency, poor governance, and systemic risk spillovers — that threaten not just investors but broader financial stability.
👉 Discover how global regulations are reshaping the future of digital assets.
The Rise and Risks of Cryptocurrencies
Cryptocurrencies are digital tokens that enable peer-to-peer transactions through decentralized networks. Unlike traditional fiat currencies, they carry no legal tender status or intrinsic value. Instead, their worth is determined purely by market demand and user trust.
For individuals in countries with unstable currencies or restricted financial systems, crypto offers a pathway to financial inclusion and cross-border economic participation. However, this decentralization also introduces significant risks — volatility, fraud, operational failures, and lack of investor protection.
The FSB emphasizes that the growing integration between crypto markets and traditional finance means that failures within the crypto ecosystem can rapidly transmit risk across borders and into mainstream financial institutions. As these linkages deepen, so too does the potential for systemic disruption.
FSB’s 9-Point Regulatory Framework
In response, the FSB has introduced nine high-level recommendations designed to guide national regulators in overseeing crypto asset activities and markets. These are not binding rules but serve as a blueprint for coordinated global action.
Key elements of the framework include:
- Cross-border regulatory cooperation: Regulators must collaborate internationally to close jurisdictional gaps exploited by multinational crypto firms.
- Governance requirements for issuers: Crypto asset issuers must establish transparent and accountable governance structures.
- Mandatory disclosures: Companies must provide clear, consistent information about risks, operations, and financial health.
- Risk management standards: Firms must implement robust systems to identify, measure, and mitigate financial and operational risks.
- Consumer and investor protection: Strong safeguards must be in place to prevent fraud, misrepresentation, and loss of funds.
- Regulatory clarity for stablecoins: The FSB revised its earlier guidance on stablecoins — digital assets pegged to traditional currencies — stressing the need for reserve transparency and redemption guarantees.
- Supervision of critical service providers: Entities like exchanges, custodians, and lending platforms must be subject to prudential oversight.
- Incident response mechanisms: Regulators should have tools to respond swiftly to failures or market disruptions.
- Alignment with "same activity, same risk, same regulation" principle: Activities that pose similar risks to traditional financial services should face equivalent regulatory treatment.
This principle — same activity, same risk, same regulation — lies at the heart of the FSB’s approach. It ensures that innovation is not stifled, but neither is it allowed to bypass established safeguards.
Why This Matters: From FTX to Global Oversight
The collapse of FTX, headquartered in the Bahamas (a non-FSB member), highlighted how easily bad actors can exploit regulatory arbitrage. By operating across multiple jurisdictions with weak oversight, such firms create blind spots that endanger global financial stability.
John Schindler, FSB Secretary, stated plainly:
“Crypto market participants need to stop operating outside regulatory perimeters. They can no longer claim uncertainty — our framework sets clear expectations.”
The FSB’s recommendations focus specifically on financial stability risks, not every possible concern tied to crypto (such as environmental impact or tax evasion). Notably excluded from this framework are central bank digital currencies (CBDCs), which fall under separate policy discussions.
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Industry Response: A Call for Clarity and Consistency
Reactions from industry leaders have been largely positive. Konstantin Horejsi, Chief Product Officer at Blocktrade, welcomed the guidelines:
“The crypto community has never asked for special treatment — just clear rules comparable to other asset classes.”
He added that while implementation will vary across regions, the FSB’s work provides a crucial foundation. Europe’s Markets in Crypto-Assets (MiCA) regulation serves as a real-world example of what comprehensive oversight can look like — a model Horejsi believes other economic blocs will soon follow.
Monsur Hussain, Head of Financial Institutions Research at Fitch Ratings, echoed this sentiment:
“Regulation isn’t about legitimizing crypto — it’s about protecting stakeholders and ensuring financial stability.”
The Road Ahead: Coordination and Implementation
The FSB is not acting alone. It has developed a joint work program with standard-setting bodies (SSBs) and will collaborate with the International Monetary Fund (IMF). A joint FSB-IMF report is scheduled for September 2023, combining macroeconomic analysis with regulatory insights to support a holistic policy approach.
This coordination aims to ensure that regulations are not only effective but also coherent across borders — preventing fragmentation and regulatory shopping.
National regulators are now expected to translate these high-level principles into enforceable laws. While enforcement will differ by region, the global consensus is shifting: crypto must comply.
Frequently Asked Questions (FAQ)
Q: What is the FSB’s main goal with this new framework?
A: The primary objective is to mitigate financial stability risks posed by crypto assets by ensuring consistent global regulation. The framework aims to prevent another FTX-like collapse from destabilizing broader markets.
Q: Does this mean all crypto will be banned or heavily restricted?
A: No. The goal is not to suppress innovation but to apply proportionate regulation based on risk. Responsible projects that comply with transparency and consumer protection standards can continue to operate.
Q: Are stablecoins specifically targeted?
A: Yes. Stablecoins are considered higher-risk due to their potential scale and links to traditional finance. The FSB stresses full reserve backing and clear redemption rights.
Q: Will this affect decentralized finance (DeFi) platforms?
A: While DeFi poses unique challenges due to its decentralized nature, any entity providing critical services (e.g., custody, trading) may fall under regulatory scope if it creates systemic risk.
Q: How soon will these changes take effect?
A: The framework is advisory. Actual implementation depends on national regulators, but momentum is building — especially with MiCA in Europe setting a precedent.
Q: Is this framework legally binding?
A: No. The FSB issues recommendations. Binding laws must be enacted by individual countries or regional bodies like the EU.
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The message is clear: the age of unregulated crypto is ending. With coordinated global oversight on the horizon, companies must adapt or face exclusion. For users and investors, this shift promises greater safety, transparency, and long-term sustainability in the digital asset ecosystem.
As regulators align and enforcement tightens, one thing is certain — there will be no more hiding places.