The Financial Stability Board, the advisory body of the G20 countries, has released a report on the progress of its efforts so far regarding cryptocurrency regulation.
As its name suggests, the FSB is concerned with the stability of the global financial system. Founded in 2009, it is based in Basel and funded by the Bank for International Settlements. It is made up of representatives from the finance departments and central banks of all G20 countries – all in all, 68 institutions are members.
It does not have any enforcement power, but can make suggestions – in April we reported when it released software that firms can use to avoid breaking the law.
The report is a brief summary of the efforts being made by a number of international organisations to build laws around cryptocurrency.
Joining the FSB in its work is the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision (BCBS).
In the report, the FSB states that it does not believe that cryptocurrency represents a threat to market stability. However the market should be monitored lest such a situation occur in the future. In order to monitor the sector, the FSB and CPMI developed metrics.
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These include the size of the cryptocurrency market, the exposure of financial institutions to that market, and the number/nature of financial derivatives based on cryptocurrency.
Meanwhile, the IOSCO concentrated on initial coin offerings. It has established the ‘ICO Consultation Network’ and in May 2018 agreed to set up up a ‘support framework’ which will provide information to national regulators that are trying to write applicable laws. It also says that it recognises the significance of cryptocurrency exchanges and would like to work with the BCBS in deciding what approach to take in this regard.
The BCBS in its turn is examining the relationship between banks and cryptocurrency. That is, it has been attempting to quantify the level of exposure that these institutions have, but a lack of reliable data has made this difficult.
The report is meant for the G20 finance ministers and central bank governors, who will meet in Buenos Aires on 21-22 July.
The FSB is currently chaired by Mark Carney, a Canadian who is also the head of the Bank of England.
Carney said in February of this year that he didn’t see Bitcoin as a viable currency, considering it to be more of an asset.
Despite this, the bank has been seriously considering a national cryptocurrency; after setting up a research unit for exactly this purpose in January 2018, it published in April an academic proof of concept for a digital ledger network. Following that, in May the bank published a document analysing the risks involved with three possible models of a central bank digital currency. The bank actually tested Ripple as far back as July 2017.