The Financial Stability Board (FSB), the regulatory watchdog for G20 countries, on Jul 17, 2023, issued final recommendations for ensuring consistent and comprehensive regulation in the cryptocurrency asset sector, per a Reuters report.
After crypto’s recent turbulent year and the collapse of FTX, a cryptocurrency exchange, in November 2022, the importance of a comprehensive global regulatory guideline became increasingly necessary. This is more so as the adoption of cryptocurrencies is growing by the day.
Why Did the Need for Regulations Arise?
One of the main concerns raised by FSB was to curb another risk of a global financial contagion. As stated by the FSB in the Reuters article, recent occurrences have shown that the risk of further spillovers from crypto asset markets into the larger financial system could increase if its ties to traditional banking deepen.
As the cryptocurrency market expands, so does the need to adopt fundamental principles inspired by mainstream finance, before the sector poses enough risk to jeopardize financial stability. This entails implementing robust governance to prevent conflicts of interest, practicing sound risk management, and ensuring transparent disclosures to safeguard customer funds separately from company assets.
Diverse Regulatory Landscapes
According to CoinDesk, different approaches are being implemented by different regulatory bodies in order to tackle vulnerabilities and uncertainty in the cryptocurrency market. The European Union has introduced a tailored law called Markets in Crypto Assets, while the U.S. SEC has explored applying century-old rules for traditional financial instruments.
The FSB’s principles aim for flexibility to accommodate various approaches, emphasizing continuity. Basel Committee and IOSCO, two international banking and securities watchdogs, will add more metrics to the FSB regulations in order to make them more comprehensive.
Crypto Industry’s Mixed Sentiments on Regulations
As per Forbes India, the FSB’s comprehensive recommendations advocate a uniform regulatory framework enclosing crucial aspects such as crypto asset markets’ interconnectedness, adherence to international standards, and supervisory approaches. Primarily, it centers on three key areas — safeguarding client assets, managing conflicts of interest and bolstering cross-border cooperation.
While some industry players have criticised the move by the regulatory watchdog stating that the idea of cryptocurrencies functioning under a decentralised environment is lost and the regulations highlight only the view point of the governments, the broader market has welcomed the move.
The introduction of regulations targeting financial risks in the crypto market marks a significant milestone in the pursuit of a comprehensive and harmonized global regulatory framework that fosters responsible innovation.
This announcement brings positive implications for investors, offering transparency, risk management and strong governance in a previously unregulated sector. It empowers them to navigate the crypto landscape with confidence and seize opportunities while ensuring greater protection.
ETFs in Focus
Investors looking to invest in the cryptocurrency market while effectively managing risk can look into the following ETFs. The ETFs mentioned below have performed well in the last month (as on Jul 19) and can help investors navigate the crypto market and minimize risks while maximizing exposure.
Valkyrie Bitcoin Miners ETF (WGMI) – up 52.64%
IShares Blockchain And Tech ETF (IBLC) – up 34.13%
Bitwise Crypto Industry Innovators ETF (BITQ) – up 48.62%
Global X Blockchain & Bitcoin Strategy ETF (BITS) – up 30.96%
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Bitwise Crypto Industry Innovators ETF (BITQ): ETF Research Reports
Global X Blockchain & Bitcoin Strategy ETF (BITS): ETF Research Reports
Valkyrie Bitcoin Miners ETF (WGMI): ETF Research Reports
iShares Blockchain and Tech ETF (IBLC): ETF Research Reports
