FSB published a report that focuses on the regulatory and supervisory issues associated with crypto-assets. The report, which is intended for G20 finance ministers and central bank governors, offers an update on the work of BCBS, CPMI, IOSCO, the Financial Action Task Force (FATF), FSB, and the Organization for Economic Co-operation and Development (OECD). The report notes that gaps may arise from the absence of international standards or recommendations and in cases where such assets are outside the perimeter of regulators. The report concludes with a recommendation that the G20 keep the topic of regulatory approaches and potential gaps, including the question of whether more coordination is needed, under review.
The FSB report highlights that international organizations are monitoring and analyzing developments, setting supervisory expectations for firms, and clarifying how international standards apply to crypto-assets. However, assessing the significance of potential gaps is challenging, given the rapidly evolving nature of the crypto-asset ecosystem and related risks. It is suggested that a forward-looking approach to monitoring crypto-assets can help provide a basis for identifying potential gaps and areas that should be prioritized or focused on. The work of FSB has focused on monitoring risks to financial stability and preparing a directory of regulators on crypto-assets, which was published April 2019. The FSB assessment concluded that crypto-assets do not currently pose material risks to global financial stability, but that they do raise a number of further policy issues beyond financial stability. Moreover, FSB concluded that vigilant monitoring remains warranted, as a variety of new products and services seem to be under development. To this end, a further monitoring note will be submitted to its Standing Committee on Assessment of Vulnerabilities (SCAV) in September 2019, including developments in stablecoins and tokenization.
Additionally, the BCBS initiatives on crypto-assets include developing high-level supervisory expectations for banks engaged in crypto-asset activities, monitoring developments related to crypto-assets, and quantifying banks’ crypto-assets exposure. The Basel Committee is collecting data on banks’ direct and indirect exposures to crypto-assets as part of its end-2018 Basel III monitoring exercise. BCBS will discuss the results of this data collection exercise at its meeting in October 2019 and the results will inform the monitoring work of FSB. BCBS is also considering whether to formally clarify the prudential treatment of crypto-assets across the set of risk categories such as credit risk, counterparty credit risk, market risk, and liquidity risk.
Another international standard-setter IOSCO had, in May 2018, agreed to develop an initial coin offering (ICO) support framework to assist members in dealing with the ICO-related regulatory risks. IOSCO is also examining issues and risks associated with the trading of crypto-assets on crypto-asset trading platforms and aims to publish a final report on this by the end of 2019. In addition, IOSCO´s policy committee on accounting is engaging with the International Financial Reporting Interpretations Committee and IASB and has encouraged the development of an appropriate accounting standard for crypto-assets.
Keywords: International, Securities, Banking, Accounting, Crypto-Assets, Financial Stability, Prudential Treatment, Regulatory Gap, FSB
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